The US dollar has posted its steepest first-half decline in more than five decades, with the broad Dollar Index sinking 10.8% in the six months to 30 June. Comparable gauges tell a similar story: the ICE Dollar Index is down roughly 10%, while the WSJ measure has fallen 8%, its worst start since 2002. The drop is the sharpest opening-half slide since 1973, when the end of the gold-backed Bretton Woods system sent the greenback tumbling 15%.
Analysts tie the latest sell-off to President Donald Trump’s stop-start tariff campaign, a $3.2 trillion tax package that is set to swell federal borrowing, and growing expectations that the Federal Reserve will begin an aggressive rate-cutting cycle. “The dollar has become the whipping boy of Trump 2.0’s erratic policies,” said Francesco Pesole, FX strategist at ING, noting that foreign investors are demanding heavier hedging for US assets.
As the greenback retreated, the euro has advanced about 13% to trade above $1.17, and the Dollar Index briefly touched a three-year low of 96.47. Central banks have stepped up gold purchases, fund managers have trimmed Treasury holdings and Morgan Stanley warns the currency could lose a further 10% before year-end—placing 2025 on course for the worst annual performance in modern times.
A weaker dollar makes US exports more competitive but raises the cost of imported goods and overseas travel for American consumers, potentially amplifying tariff-driven inflation. The slide also complicates Washington’s effort to finance widening deficits, with lower long-term Treasury yields unlikely to hold unless foreign demand remains robust despite rising hedging costs.
The dollar just had its worst start to a year since 1973. Trump’s chaos is shaking global confidence in the U.S. economy and that’s how financial crises begin.
