The dollar recorded its worst performance of the week since the early days of the Covid pandemic, but analysts believe the panic over the dollar may not be over yet.

The Bloomberg spot dollar index is down about 3.5 percent this week, the biggest drop since March 2020.

The latest sell-off means that the dollar indicator is now 6 percent below the record peak reached in late September, with the yen being the main beneficiary. While these moves suggest that the dollar could remain under pressure in the coming weeks due to Fed rate hikes in stride, market participants remain concerned that the trend will persist over the long term.

"The dollar peak might be past us, but a dollar downtrend may not be there yet,” ING Groep NV analysts wrote in a note, adding that the Dutch bank remains “moderately bullish” on the dollar into year-end.