US dollar slide could pressure export-driven sectors and banks, S&P warns

A depreciating US dollar could have an immediate impact on export-focused sectors in many countries, as well as banks with significant lending to them, according to S&P Global Ratings.

“The most immediately exposed sectors and geographies are those where a weaker US dollar could strain volumes and revenues or compress margins, especially if they are exposed to US tariffs and lack a production footprint in the US,” said credit analyst Xavier Jean.

“Financial institutions with meaningful corporate lending to export-oriented small to medium-sized enterprises [SMEs] could see pressure on their asset quality.”

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This is particularly the case for the Thai, Taiwanese and Cambodian banking systems.

Exports contributed to nearly 60 per cent of Thailand’s gross domestic product, with exports to the US representing about 20 per cent of the GDP, S&P said, citing recent data. For Taiwan and Cambodia, which were also highly dependent on exports of goods and services, exports to the US accounted for about 20 and 40 per cent of their total exports, respectively. A significant number of exporters in these regions were SMEs.

A view of Bangkok, Thailand. Exports contributed to nearly 60 per cent of Thailand’s annual GDP. Photo: Sam Tsang alt=A view of Bangkok, Thailand. Exports contributed to nearly 60 per cent of Thailand’s annual GDP. Photo: Sam Tsang>

The US dollar has fallen from a peak in January when President Donald Trump returned to office and slapped tariffs against US trading partners. The US dollar index has dropped 9.7 per cent since a peak on January 13.

The pace of the dollar’s weakening in 2025 had been notable, S&P said. The decline, 9 per cent against currencies of advanced economies and 6 per cent against emerging markets, had mostly occurred since new US tariffs were announced in April, it added.

“The depreciation and increased volatility of the US dollar could be fleeting and inconsequential or it could evolve into a longer-term trend with broad credit ramifications,” S&P said.

The rating agency expected US dollar depreciation against the euro, yen, Canadian dollar and most emerging-market currencies over the next three years to be “modest and orderly”. It has not taken any rating actions solely linked to the depreciation.

S&P also expected the US Federal Reserve to cut rates by a total of 75 basis points in 2025 and another 50 basis points in 2026.

However, in a downside scenario where the US dollar weakened significantly and became much more volatile over the next three to five years, the economic and credit impact could be broader and more serious, according to the firm.

“We believe the impact of a weaker US dollar could be compounded by high global debt levels, increasingly complex and integrated financial systems, and less transparent segments of the financial infrastructure such as derivatives, private credit and hedge funds,” S&P said.

A weaker dollar, however, was likely to benefit US exporters and domestic manufacturers with a high share of dollar-linked costs like airlines, as well as sovereigns, financial institutions or corporates with significant dollar debt in emerging markets, it said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.