While the US stock market has fully recovered from a spring rout, the relentless drop in the dollar is prompting currency experts to warn of greater financial market turmoil ahead.
The American currency is down more than 10 percent so far in 2025, a historic retreat that has overlapped with occasional spikes in long-term US Treasury yields.
The anomalous dynamic suggests investors are rethinking US holdings, once considered safe havens, as they take stock of President Donald Trump’s unpredictable policy shifts.
While the dollar’s status as the global reserve currency appears unshakeable in the near future, many currency experts expect the greenback to continue to weaken in the coming years, given expectations for slower growth after a long run of US out-performance.
“It’s US exceptionalism basically falling by the wayside and the rest of the world playing catch-up,” said Erik Nelson, a macro strategist at Wells Fargo, who predicts the dollar will continue to depreciate.
In April, global markets were shaken by “Sell America” gyrations in the stock, foreign exchange and US treasury markets, and analysts expect similar sentiment in the future.
“I think the world is becoming a little bit less stable politically, which is generally kind of problematic for economic and financial market volatility,” Nelson said.
“We are witnessing the end of a 14-year bull run of the US dollar,” said Joseph Brusuelas, chief economist at RSM US, a consultancy, who expects a “multi-year unwinding of the dollar.”
Harvard Economist Kenneth Rogoff, author of the 2025 book “Our Dollar Your Problem,” said central banks in China and elsewhere were diversifying away from dollars even before 2025, but that Trump accelerated the trend.
“I think we’ll see a period of a lot of financial volatility, largely centered around the chaos in the United States,” Rogoff told AFP, pointing to factors that include uncertainty about US central bank independence and the rise of populism.
“We’ll probably have a more volatile period in financial markets over the next 10 years than we have in the preceding.”
– Onshoring benefit –
Both Nelson and Rogoff pointed out that the dollar at the start of 2025 was unusually lofty after surging in the weeks following Trump’s November 2024 victory.
Economists have since rethought assumptions that the US would continue to outperform rival economies.
According to the ICE US Dollar Index, a basket of seven currencies, the dollar fell 10.7 percent through the end of June, the biggest drop in the first six months of a year since 1973.