Nomura’s Richard Koo Predicts Orderly Decline of US Dollar Amid Structural Economic Shifts

Nomura’s chief economist Richard Koo anticipates a controlled depreciation of the US dollar, citing rising Treasury yields, new steel tariffs, and mounting debt as key drivers. The ISM manufacturing index’s drop to 48.5 in May underscores persistent sector contraction, reinforcing market expectations of dollar weakness. Higher yields on 30-year bonds—now at 4.97%—fail to bolster the currency, signaling deeper structural concerns.

Trade policies are accelerating the trend. Steel tariffs of 50% triggered a 54% surge in aluminum premiums and a 14% rise in steel futures, reshaping currency forecasts. Treasury Secretary Scott Bessent’s interventions aim to calm debt sustainability fears, but markets remain wary. Koo’s analysis suggests this adjustment will be gradual, not chaotic—a deliberate recalibration of global currency dynamics.