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The US dollar has had its worst performance in the first half of 2025 since 1973, as Donald Trump's trade and economic policies prompt global investors to rethink their exposure to the world's dominant currency. The dollar index, which measures the currency's strength against a basket of six other currencies including the pound, euro and yen, has fallen more than 10% so far in 2025, its worst start to the year since the end of the gold-backed Bretton Woods system.
The currency fell 0.2% on Monday as the U.S. Senate prepared to begin voting on amendments to Trump's "big, beautiful" tax bill. The landmark legislation is expected to add $3.2 trillion to the U.S. debt over the next decade and has fueled concerns about the sustainability of Washington's borrowing, sparking an exodus from the U.S. Treasury market.
The dollar's sharp decline puts it on track for its worst first half of the year since a 15% loss in 1973 and the weakest performance over any six-month period since 2009. The currency's decline has dashed widespread predictions at the start of the year that Trump's trade war would inflict greater damage on economies outside the US, fuelling US inflation, strengthening the currency against its rivals.
Instead, the euro, which some Wall Street banks had predicted would fall to parity with the dollar this year, has risen 13% to above $1.17 as investors focus on growth risks in the world’s largest economy and demand has risen for safe-haven assets such as German bonds elsewhere.
Also pushing the dollar lower this year have been growing expectations that the Federal Reserve will cut interest rates more aggressively to support the Trump-led U.S. economy, with at least five quarter-point cuts expected by the end of next year, according to futures contracts. Bets on lower interest rates have helped U.S. stocks shake off concerns about a trade war and conflict in the Middle East to hit record highs. But the weaker dollar means the S&P 500 continues to lag far behind rivals in Europe when returns are measured in the same currency.
Large investors, from pension funds to central bank reserve managers, have expressed their desire to reduce their exposure to the dollar and US assets, and have questioned whether the currency is still providing a haven from market fluctuations.
Gold has also hit record highs this year on continued buying by central banks and other investors worried about the depreciation of their dollar-denominated assets. The dollar’s decline has pushed it to its weakest level against a basket of major currencies in more than three years. Given the speed of the decline and the popularity of bearish bets on the dollar, some analysts expect the currency to stabilize./ FinancialTimes
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