Dollar Index Sinks 10.8% in Worst First-Half Since 1973

The US dollar has logged its steepest first-half decline in more than five decades, with the ICE Dollar Index falling 10.8% in the first six months of 2025. The broader Bloomberg gauge is down almost 9% for the year, while the trade-weighted DXY slipped to 96.37—its weakest level since March 2022. The drop eclipses any January-to-June performance since 1973, when the greenback plunged 15% in the wake of the Bretton Woods collapse.

Market participants cite President Donald Trump’s renewed tariff offensive and a $3.2 trillion tax package as the main catalysts for the sell-off, saying the measures stoked fears over higher inflation and swelling federal debt. “The dollar has become the whipping boy of Trump 2.0’s erratic policies,” ING foreign-exchange strategist Francesco Pesole told the Financial Times. Futures prices now imply as many as five Federal Reserve rate cuts by the end of 2026, further eroding the currency’s appeal, while the euro has climbed roughly 13% to trade above $1.17.

The weaker dollar raises the cost of imported goods and overseas travel for Americans but boosts the competitiveness of US exports. Large investors, including pension funds and sovereign reserve managers, have stepped up hedging and diversification away from the greenback. Even so, Pimco’s chief investment officer Andrew Balls said the slide does not yet threaten the dollar’s status as the world’s reserve currency, though the speed of the move has underscored fragile confidence in Washington’s economic stewardship.