The US dollar has suffered its worst first-half performance since 1973, tumbling 10.7% against a basket of global currencies through June. The decline brought the greenback to its lowest level since February 2022, as investors reacted to a mix of fiscal and policy concerns including swelling deficits, persistent trade tensions, and the growing possibility of interest rate cuts by the Federal Reserve. The dollar’s decline began in mid-January and, apart from a brief April rebound sparked by optimism around former President Trump’s tariff plans, has continued largely unabated.
According to B. Riley Wealth Management strategist Art Hogan, investors are responding to a growing list of structural concerns, including massive deficits, deteriorating international alliances, and an administration perceived to favour a weaker dollar. With public US debt nearing US$30 trillion and the 2025 deficit projected at nearly US$2 trillion, questions have emerged about the long-term strength of American assets. Some central banks have responded by increasing gold purchases—24 tonnes a month, according to the World Gold Council—as they diversify reserves away from the dollar and hedge against inflation and political uncertainty.
The weaker dollar has not necessarily hurt US equities, with more than 40% of S&P 500 revenues coming from international sales. A depreciating dollar can help boost those earnings by making American exports more competitive. But the broader conversation has shifted toward fears over the erosion of US financial dominance. TS Lombard is among the firms maintaining short positions on the greenback, calling it “the gift that keeps on giving,” while citing structural overvaluation and policy direction as justification. Analysts also warn that if the Fed moves forward with anticipated rate cuts later this year, downward pressure on the currency could intensify, though recent history shows that rate cuts can sometimes produce unexpected effects.
Still, not all market participants are convinced the dollar’s trajectory is locked in. Some, like Capital Economics’ Thomas Matthews, view the recent slide as part of a cyclical adjustment rather than a structural breakdown. Others, including Wells Fargo’s Jennifer Timmerman, argue that the dollar remains deeply embedded in global finance and trade, underpinned by the US’s legal system, transparency, and deep capital markets. Treasury Secretary Scott Bessent echoed that sentiment, calling the currency moves “not out of the ordinary.” Yet with Treasury yields rising and momentum still pointed lower, few on Wall Street are willing to rule out further declines just yet.
