Further falls would exacerbate price pressures when tariffs are already pushing up inflation, Hatzius writes in an opinion piece in the Financial Times,
A weaker dollar, by making exports cheaper, would also help narrow the U.S. trade deficit and help buffer the economy from recession. But Hatzius notes the drivers of dollar weakness matter and reduced appetite for U.S. assets could offset the impact of a weaker currency on financial conditions

"I often dodge questions about the dollar. A large body of academic literature and my own experience as an economic forecaster have taught me that predicting exchange rates is even harder than predicting growth, inflation and interest rates," said Hatzius.

"But with all due humility, I believe that the recent dollar depreciation of 5% on a broad trade-weighted basis has considerably further to go."

Hatzius, noted that two historical periods with similar dollar valuations to the present day -- the mid-1980s and early 2000s -- set the stage for a 25-30% depreciation.

The IMF estimates non-U.S. investors hold around $22 trillion in U.S. assets. Hatzius says this perhaps makes up a third of combined portfolios, with half of this in equities that are often not hedged for currency moves.
Hatzius adds a U.S. current account deficit of $1.1 trillion has to be financed by a net capital inflow of the same amount every year. In theory, this comes from foreign buying of U.S. assets, so even a pause in foreign U.S. asset purchases could hurt the greenback.