The dollar bills and the reduction stock chart can be seen in the illustration taken on April 25, 2025.
Ruvic Date | Reuters
It has just made its worst performance since Richard Nixon became president, with the dollar facing various headwinds in the second half of the year, which could have important investment implications.
By June, the Greenguard had a game of 10.7% against his global peers, making it the worst first half since 1973, with Nixon breaking the gold standard for Bretton Woods. At its bottom, the currency hit its lowest point since February 2022.
The way forward may not be brighter.
That’s because of many of the same factors – policy volatility, debt inflation and deficits, and potential benefits Fed’s reduced feesto name a few – when investors seek other safe haven avenues, they may remain in the minds of investors.
The dollar fell
“Some of these may be coping, and then we certainly have given currency traders enough to think about the catalyst right now,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “You can check a lot of boxes. You’re going through a lot of deficits and no one wants to stop it on both sides of the aisle. You’re alienating friends both military and trade. You have enough potential negative catalysts. Then, once you start the momentum, it’s hard to stop it.”
Indeed, the dollar’s gliding began in mid-January and has shown only occasional signs since. Hope that President Donald Trump’s tariffs Not as steep as the mind, sparking a brief rally in mid-April, but in most cases, gravity is lower.
Market Influence
Of course, the dollar slideshow is not entirely a poison to stocks.
As S&P 500-year revenues come from international sales, the weaker dollar helps make U.S. exports cheaper, an important point to consider in the ongoing trade war.
But the lower move coincides with the chatter of the potential end of American excellence and dollar hegemony, with the public share of U.S. debt approaching $30 trillion, while the deficit in 2025 is almost $2 trillion. If U.S. assets, such as greenback and Treasury debt, lose their prominence on the global stage, this could have a strong impact on risky assets such as stocks.
According to the World Gold Council, global central banks are increasing gold purchases to 24 tons per month to replace U.S. assets. Gold’s best first half game since 1979.
“We think central banks are buying gold to diversify reserves, reduce their dependence on (USD), and resist inflation and economic uncertainty,” Bank of America research analyst Lawson Winder said in a note. “This is a trend that we think will continue, especially among the uncertainty of U.S. tariffs and fiscal deficit issues.”
Similarly, TS Lombard keeps a shorter position on Greenback, which is called a “constant gift.”
“Trump’s clear desire for the Fed and the administration for a weak dollar only increases that view,” wrote Daniel von Ahlen, senior macro strategist at the company. “The dollar is still overvalued on most FX indicators… USD is everywhere, why not expect the dollar to be undervalued? We are still a very short dollar in a series of deals in the book.”
The Fed can also exert greater downward pressure by reducing prices later this year through expected lower prices. But the impact of the Fed’s loosening can be tricky considering the last time the central bank cuts in 2024.
Hope it reverses
To be sure, the continued decline in the dollar is by no means a sure thing, while others on Wall Street believe that the trend decline may reverse.
Thomas Matthews, head of Asia-Pacific markets at Capital Economics, said recent stock rally shows that comfort with U.S. assets is becoming more and more comfortable, and earlier dollar weaknesses may just be the product of anticipated appreciation of other currencies and the conversion of hedging strategies.
Wells Fargo also believes the fear associated with the dollar is exaggerated.
“It is obvious to us that green remains key to global trade and finance, and is far from irrelevant,” Jennifer Takerit, analyst Jennifer Takerit, analyst Jennifer Takerit, analyst Jennifer Takerit, analyst Jennifer Takerit, analyst Jennifer Takerit, using statistical methods to analyze the role of the dollar, and it is clear to us that green remains key to global trade and finance, and is far from irrelevant.” “We believe that the dollar benefits from deep-rooted advantages such as rule of law, transparency and highly liquid financial markets that have shifted the global shift from the dollar to an extremely difficult and slow process, especially because of the potential weaknesses of the most obvious dollar alternative.”
Treasury Secretary Scott Bessent also weighed the trade-offs and told CNBC on Monday that currency volatility was “not unique.”
However, rising yields on Treasury debt also express concern about the US dollar and other U.S. assets.
“We are in a stage of increasing situations in terms of momentum,” said B. Riley strategist Hogan. “But fundamentally, you can certainly put a lot of things you focus on on the whiteboard.”
