The US dollar is on track for its worst year in modern history and may not be done falling yet. The greenback is down more than 7% this year and Morgan Stanley predicts it could fall another 10%. A weaker dollar could make US exports more competitive, boosting Trump’s plan to rebalance US trade, but makes imports more expensive, adding to the sting of tariffs.
The question ahead is whether the dollar doesn’t just lose its value, but its role at the center of the global financial system. So far, there are few alternatives. And efforts to de-dollarize — central banks shifting into gold, China shoveling its currency into developing nations through swap lines — haven’t meaningfully shifted the picture. But as political economist Ngaire Woods wrote for Semafor in an essay earlier this year, “they haven’t dethroned the dollar, but that’s because the US government has protected it through sound policy and global engagement.”
Food for thought: The year that came closest to 2025 in dollar depreciation was 1973, and the result was then-President Richard Nixon taking the US off the gold standard. “Big moves in the dollar tend to create moments of instability,” Morgan Stanley’s Wilson said.
— Liz Hoffman