Dollar Slides 10.8%, Worst First-Half Since 1973

The US dollar has recorded its steepest first-half decline in more than five decades, with the ICE Dollar Index dropping 10.8% between January and June. The slide surpasses every first-half performance since 1973, when the greenback fell 15% after the collapse of Bretton Woods.

Other gauges echoed the weakness: the Bloomberg Dollar Spot Index is down almost 9% this year, while the WSJ Dollar Index has lost 8%, its sharpest start since 2002. The widely watched DXY measure touched 96.37 this week—its lowest level since February 2022—before stabilising just above 96.4.

Currency strategists cite a confluence of policy and macroeconomic factors. President Donald Trump’s 145% tariff on Chinese goods, announced in April, and a pending multi-trillion-dollar tax package have heightened worries about sustained inflation and a swelling federal deficit. Expectations that the Federal Reserve could deliver as many as five quarter-point rate cuts over the next 18 months have further reduced the dollar’s yield advantage, prompting investors to diversify into other currencies, gold and non-US assets.

A weaker dollar can bolster US exporters but raises costs for importers and for Americans travelling abroad. While some analysts argue that bearish positioning is becoming crowded, banks including Morgan Stanley caution the currency could shed another 10% by year-end if fiscal and trade uncertainties persist.