Over the past few months, the US dollar has recently reached near all-time lows. This sharp drop is alarming economists and investors who fear what it may mean for the global economy. The dollar index is a widely watched gauge of the currency’s strength against a basket of other big currencies. It has since dropped to its lowest lows in three years, marking a tremendous change in the markets’ dynamics.
The last time the dollar fell this low was on January 5th, 2021 at a low of 89.4. It rose to a high of 114.1 on September 27, 2022. This rollercoaster trajectory was created somewhat by the impacts of the dollar’s volatility on international trade and investment. As of the writing, April 22, 2025, the value of the dollar has dropped to 98.4, at its lowest value since March of 2022. Just a day earlier, it had gone down even more to 98.3.
The dollar is the dominant currency for international trade. Indeed, nearly 50 percent of all global trade invoices are denominated in US dollars. Central banks around the world use the currency to conduct international transactions, service debts, and stabilize their domestic currencies’ exchange rate. As a result, any drop in the dollar can pose severe ramifications for international trade and financial markets.
A united, strong dollar has long represented American political and economic hegemony. With recent swings, we should all start asking whether it’s reasonable to think this is a long-term trend. When interest rates are high, investors rush into the dollar. This high-rate environment allows them to make money on their cash reserves in a way that other currencies can’t. A mixture of dependent inflation expectations and central bank policy polarization has tweaked the mechanisms driving the dollar’s falling value.
At first, the anticipation of increasing US interest rates was dollar-positive. A series of recent sell-offs in US government bonds have sent its value tumbling. Together, these movements are symptomatic of the major economic uncertainties still at play in the market. Consequently, global investors are reconsidering risk and recalibrating their asset mixes.
Political considerations are just as important to the dollar’s fate. Former President Donald Trump’s vicious public campaign against Federal Reserve Chair Jerome Powell in 2018-19 has left a cloud of doubt. Trump personally attacked Powell, calling him “a big loser” and calling for his firing. Most observers agree that such a comment has driven much of the yo-yoing market nervousness about the direction of US monetary policy.
Jane Foley, head of foreign exchange (FX) strategy at Rabobank found the state of affairs “very shocking.” She cautioned that any sudden and unanticipated fall of the dollar’s global prominence may carry severe risks to the stability of the international financial system.
Despite these headwinds, a few experts are optimistic that the dollar will claw back some of its lost ground in the weeks ahead. Most importantly, they caution it is unlikely to ever hit those heights again. That’s largely because of continued economic pressures and shifts in the market.