📉 What is happening now
1. Worst half-year since 1973
The dollar has lost more than 10% compared to a basket of major currencies (euro, pound, yen ...), marking its worst performance in the first six months since 1973.
2. Factors of the downturn
Federal debt has risen by about $3.3 trillion, expectations for interest rate cuts, and unstable tariff policies have all played a significant role.
3. Weak future expectations
Readers' expectations and polls indicate continued pressure; 37% of analysts say trade tariffs will be the main driver of weakness, and data shows short positions on the dollar at levels not seen in two years.
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🪙 Consequences of the decline
Export advantage: A weaker dollar makes U.S. exports relatively cheaper, which may help reduce the trade deficit.
Imported inflation: A weaker dollar affects consumer prices, which may increase domestic inflationary pressures.
Foreign Treasury bond yields: Declining yields on dollar-denominated bonds when converted to strong currencies, causing losses for foreign investors.
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🏦 Is it a major crisis?
Not a structural collapse: Despite the severity of the decline, the dollar remains the primary currency in global reserves, and its current volatility is viewed within the context of "market pricing," especially with other indicators like stocks and bonds holding steady.
Additional downside potential: Some analysts like David Roche expect the dollar to decline by 15-20% in the medium term with the likelihood of the economy entering a recession by the end of 2025.
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🔍 Analysis:
The dollar is currently experiencing a historic decline, but it is not a complete collapse.
Officials and investors are monitoring factors such as federal debt, fiscal policy, Federal Reserve independence, and the outcomes of trade negotiations.
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The impact of the downturn is neutral to positive on exports, but negative on inflation and dollar-denominated fixed income assets.
