The dollar just recorded its worst first-half slump since 1973, crashing more than 10% in the first six months of 2025.
damage? President Donald Trump has been locked into chaotic trade policies, reckless financial choices and direct pressure on the Federal Reserve.
According to Financial Timesinvestors around the world are dumping the dollar and questioning whether it still deserves a role as a safe haven in a global economy filled with better options.
The ICE dollar index, which tracks greenbacks against six major currencies, including the euro and yen, has plummeted more sharply than in the first half since the collapse of the Bretton Woods system. At the time, gold favored everything. Now under Trump 2.0, volatility and debt are doing so.
Trump's tax system adds 3.2 tons to US debt, traders will withdraw
The dollar fell another 0.2% on Monday as the Senate began considering frequently sold amendments to Trump's “big and beautiful” tax law. The bill is projected to accumulate another $3.2 trillion in national debt over the next decade, raising serious doubts about Washington's ability to raise funds. The horror sent investors fleeing the US financial market, once the safest port in the world.
Francesco Pesole, ING's forex strategist, did not sugar coat it. “The dollar has become the whipping boy of Trump 2.0's unstable policy,” he said. He pointed to questions about the tariff wars before and after, large government borrowing, and the independence of the Federal Reserve system as reasons for the greenback bleeding. Trump's weekly approach has forced investors to rethink their bets.
This did not happen. At the beginning of 2025, analysts predicted that Trump's aggressive trade stance would hurt other countries more than the US. They thought that inflation would rise, the Fed would respond, and the dollar would be stronger. It's wrong. The euro, which Topwall Street Banks had expected to reach parity in the dollar, is currently up 13%, exceeding $1.17.
Andrew Balls, chief investment officer for Pimco's global bonds, said Trump's surprise “mutual tariffs” announcement in April reversed the entire US policy outlook. “I was shocked on the day of liberation,” he said.
Andrew still believes the dollar has not lost its global reserve status any time soon, but he admits that the current wave of sales is a reality. “That doesn't mean you can't weaken the US dollar significantly,” he added. One reason? Investors around the world are currently hedging more exposure and selling greenbacks to do so.
Fed rate reductions and hedge pressure keeps the dollar down
Expectations for aggressive interest rate cuts are also lowering the dollar. The market is currently priced at least five-fifths of points by the end of 2026. It's not happening in a vacuum. Trump is pushing the Fed to act and believes Wall Street will get what he wants. Stocks may be on the highs, but adjusting the currency, the S&P 500 still isn't performing its European counterparts.
From pension funds to central banks, foreign asset managers do not hide their frustration. They have spoken out about reducing their dollar holdings. Some even wonder if US assets still offer protection when global markets become unstable. Pesor noted that foreign investors are now demanding extra hedges just to stay in dollar-denominated jobs. That additional cost is pushing more people to move.
Gold, meanwhile, is breaking the record. With increasing fear over the value of the dollar, central banks and individual investors are bolstering their purchases. They would rather hold something more solid than seeing the dollar continue to lose its value. It's music for crypto traders too. With dollar slides, alternative assets at priced like Bitcoin look even more attractive.
The dollar has now been sitting at its weakest level against rival currencies for over three years. And while some think that the worst may have ended, no one celebrates it. Guymiller, chief market strategist at Zurich Insurance, gave him the only gentle take in the room. “I think the weaker dollar will become busy trade and slow the pace of decline.” That's not a prediction of recovery. The slowing down assault.
