NEW YORK (Reuters) - Dollar bulls appear to be in hibernation after a sharp selloff in the greenback on U.S. growth concerns, but some investors think tariffs still have the power to support the U.S. currency.

The dollar is down about 5% from the January inauguration of U.S. President Donald Trump and at a four-month low, as U.S. trade tariff headlines have fed worries about U.S. growth. A German fiscal spending boost has also brightened the outlook for Europe, further straining the dollar as investors shift capital to economies viewed as having stronger growth potential.

In addition, on currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2 billion in late January.

Investors selling the dollar are concerned about tariffs slowing the U.S. economy by raising costs for businesses and consumers, disrupting supply chains and reducing trade volume.

Still, some investors do not see it as a time to sell the buck.

"I do not think that the planets have aligned for a dollar bear market," Paresh Upadhyaya, director of fixed-income and currency strategy at Amundi US, said.

The dollar could still reap gains while tariffs are fully implemented, analysts said, noting that tariffs can reduce demand for foreign currencies by raising the cost of importing foreign goods, prompting the dollar to strengthen.

Additionally, many factors that powered the U.S. dollar higher last year remain in place, Amundi's Upadhyaya said.

While U.S. growth may show signs of slowing, it remains strong compared with other major economies, he said. The dollar also still boasts a relatively high yield. Despite its poor recent performance, investors still view the greenback as a safe haven during times of global turmoil.

"I still think the dollar is king," Upadhyaya said.

Dollar bears have in the recent past been punished for betting against the buck prematurely. Over the last two years, the dollar index slumped about 5% from a near-term peak two times - October-December 2023 and April-September 2024. In both instances, the dollar recovered within months.

The dollar's near 5% post-election rally notwithstanding, strategists remain skeptical that markets have fully priced in the potential upside that could accrue to the dollar from full-blown multi-country tariffs for an extended period of time.

"We're in the camp of those expecting a relatively prolonged period of tariffs, especially with Europe being the target," said Francesco Pesole, forex strategist at ING in London.

Pesole expects the euro to eventually retreat against the dollar, finishing the year at around $1.02, down from $1.08 now.

President Trump has often railed against an excessively strong dollar, arguing it puts U.S. firms at a disadvantage. On Tuesday, Trump said he told the leaders of Japan and China they could not continue to reduce the value of their currencies, as doing so would be unfair to the U.S.

With Trump just getting started on implementing tariffs on major trading partners, some investors say the dollar could still rebound.

New 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with fresh duties on Chinese goods. This sparked worries that U.S. economic growth could slow, with prices rising further for Americans smarting from years of high inflation.

In an address to Congress, Trump said tariffs on European goods would follow on April 2, including "reciprocal tariffs" and non-tariff actions aimed at balancing out years of trade imbalances.

Ugo Lancioni, senior portfolio manager at Neuberger Berman has a slightly short tactical position on the dollar, reasoning that the currency has already priced in a good deal of the potential upside. Still, Lancioni said the dollar could pare losses if a trade war worsens.

"If you have a massive escalation that probably is not priced," Lancioni said.

The threat of tariffs makes shorting the dollar fraught with risks.

"Given the persistent tariff risk it is hard to become a dollar bear," UBS strategist Vassili Serebriakov said.

While expectations of European growth have pushed the euro to a four-month high, some investors remain skeptical the single currency can build on these gains.

"The market loves to see a European fiscal story," Steven Englander, head of G10 FX strategy at Standard Chartered ( SCBFF ) in New York, said. He noted that the euro rallied briefly in 2020 upon passage of a landmark European stimulus package to revive regional economies ravaged by the coronavirus.

"We saw what happened afterwards, we were sort of pushing parity not too long later. So you don't want to overreact to the headlines," Englander said.

The euro is expected to fall to $1.03 in three months and trade at $1.04 in six, according to a March 3-5 Reuters survey conducted mostly before the euro's latest rise.