So far this year, the value of the U.S. dollar has dropped by more than 9%. Most of the major drop can be attributed directly to the policy uncertainties in U.S. policymaking and Trump’s tariffs he initiated in late 2018. The dollar index value relative to the basket of major currencies. Ever since the tariffs were enacted, it has been downhill all the way. This continued steep depreciation is part of a larger market reaction to U.S. economic policy and global currency fundamentals.
Ever since Trump set the liberation day tariffs in place, the dollar has come under increasing pressure. Unlike the new tariffs, these tariffs were suspended for 90 days in all but one affected country. This artificial fix hasn’t prevented the dollar’s long-term drop in value. Financial analysts have noted that uncertainty due to U.S. policy choices is rattling confidence in the currency. Consequently, investors are scrambling to find other safe havens.
As of early trading on a recent morning in London, the euro rose approximately 0.2% against the dollar, trading at $1.154. The British pound advanced almost 0.3%, $1.341, and the Swiss franc rose by 0.1% versus the greenback. Together, these movements signal a powerful new direction. The dollar is sliding against all the major currencies, as the market continues to react to conflicting economic signals and the unfolding political saga in the US.
Our dollar index is breaking down, indicating increasing volatility. Investors are growing jittery about U.S. fiscal policy, as well as the country’s growing isolationism as reflected in its international trade relations. The dollar dump reveals that investors are running for the hills—not just from the dollar, but from U.S. Treasurys. All the while, uncertainties about fiscal stability and economic policy remain ever present.
Experts are cautioning that continuing policy uncertainty may leave the dollar vulnerable. External economic challenges are poised to further drive this trend for the foreseeable future. As other currencies make gains, dollar market participants may see the dollar as a weaker place to invest.