Asger Risom
Investors recoil as the dollar drops over 10% in the first half of 2025, driven by unpredictable economic signals from Washington.
Investors recoil as the dollar drops over 10% in the first half of 2025, driven by unpredictable economic signals from Washington.
Historic Decline
The U.S. dollar is on track for its weakest first-half performance since 1973, plunging over 10% this year. Analysts point to a mix of trade turbulence, swelling debt, and concerns about the Federal Reserve’s autonomy as key drivers.
A Global Pullback
Strategists say global investors are pulling back from the dollar, long seen as a safe haven. ING’s Francesco Pesole called the shift a direct consequence of “unpredictable Trump 2.0 policies.”
From Peak to Plunge
After an early rally post-Trump re-election, investor optimism gave way to fear. Inflation worries and rising interest rates reversed gains, sending the dollar downward since mid-January.
Euro Defies Expectations
Once forecast to fall to parity, the euro instead surged 13%, breaching $1.17. Wall Street misread the global response to Trump’s trade agenda.
Policy Shockwaves
A proposed U.S. budget bill would add $3.2 trillion in debt over ten years, undermining confidence in Treasury bonds. The resulting bond sell-off accelerated the dollar’s decline.
Uncertainty Weighs Heavy
Despite no immediate threat to the dollar’s reserve status, Pimco’s Andrew Balls says investor sentiment is shifting. “The dollar can still weaken significantly,” he noted.
Market Instability
Analysts warn that typical benefits of a weaker dollar—like stronger exports—are muted. Tariff threats and erratic messaging continue to distort market reactions.
What Comes Next?
Steve Englander of Standard Chartered summarized the market’s concern: “It’s not about strong or weak—it’s about what the world thinks of your policies.”
As economic uncertainties deepen, confidence in U.S. fiscal leadership is being tested.
