Analysts say that the dollar was the worst beginning in the year since 1973. Its value has decreased against other Fiat currencies with the world’s confidence in American policies. What are the challenges the US dollar faces these days, and what affects its performance?
Poor performance
The index used to estimate the value of the dollar fell against six other currencies (British pound, Japanese yen, euro, Canadian dollar, Sweden Crohn, and Swiss franc) by 10.8 % during the first six months of 2025, even more than the Covid-19 crisis. In 1973, this indicator decreased by 15 %. Also, the first half of 2025 was the worst performance for six months since 2009.
While discounts for interest rates by the US Central Bank weakens the dollar, the euro showed 13 % growth instead of the expected decline. Retired pension funds and large investors expand their exposure to European assets, which reduces dependence on the US dollar. Although the dollar becomes weaker, it does not necessarily mean that it loses the function of the currency.
The reasons behind the performance of the weak dollar
The performance in the first half of 1973 was understandablely bad, as the time of the Bretton Woods regime, which strengthened the role of the US dollar as a central reserve currency in the 1940s. In 1973, the dollar lost its fixed value while the economy was under the burden of military expenditures.
In 2025, America does not participate in a large -scale military conflict; However, the US dollar is facing challenges that may end up being influential, such as the Bretton Woods system crashing. There are two reasons that are often called as reasons for the decline in the dollar: the trade war launched by Donald Trump and the constantly growing national debt to the United States may worsen the last issue as soon as the beautiful major law becomes the law.
Not only is the harsh tariff policy itself, but its unexpected nature, as Trump declares the definitions one day, and then puts it the next day, is responsible for the confidence of foreign investors in the United States of America. Trump’s wrong behavior in the trade war destroys the image of the United States as a worthy country with a predictable behavior.
Trump warns himself of “pain” for Americans on the way to a better future. Recently, Potus has been busy pushing Jerome Powell to force the federal reserve to reduce interest rates. This step, if taken, can reduce the price of the dollar. This is exactly what happened when the Federal Reserve reduced prices in 1973. Federal Reserve officials claim that they do not reduce rates because they are trying to return inflation rates to pre -19 levels, which have not yet been completed.
So, it comes to Trump is the one who defends the disposal of the dollar. What is his goal in doing this? The high demand for the US dollar increases its value, but makes the goods produced in the United States expensive. It makes the goods produced elsewhere (let’s say China, Germany or Japan) more attractive. It is not difficult to realize that this position is directly opposed to Trump’s protective efforts and planning to return manufacturers to America. The strong dollar motivates American manufacturers to leave the country.
However, economist Kenneth Roger suggests that the role of the dollar reserve is not the only factor that leads to a trade deficit, and that the trade war not The most effective way to fix things, while admitting that it works in terms of making other countries negotiate with Trump.
Trump plans to boost spending as taxes reduce a large and beautiful invoice that makes the future of the United States more unpredictable. According to non -partisan experts, the bill may increase the national debt of America In the amount of $ 2.4 trillion. Others call a larger number. Currently, the debt is at a sign of $ 36.2 trillion.
Does Cryptocurrency create the US dollar?
Current currency lovers often talk about the dollar as already specific and unreliable currency. They see Bitcoin as a safe haven that showed its ability to increase its value against the US dollar significantly every five years.
The power of the accumulation of strong value in Bitcoin has strengthened to be a backup currency for various companies, governments, financial institutions and many retailers.
Bitcoin and Stablecoins (which has been fill in US dollars and others) has become an essential element of unacceptable population and approved economies. Russian companies are trading with their foreign partners Through encrypted currencies To avoid penalties. However, some participants claim that payment in Crypto was very easy to continue to use cryptocurrencies even when the sanctions are lifted. It may seem that this transition to cryptocurrencies may harm the US dollar, which has already preferred the international currency; However, the volume of trading made in Crypto is not yet important, and it is very early to talk about a serious effect.
America is a leading country in terms of bitcoin, companies and government. Moreover, its 2025 -friendly encryption regulations will enhance its leadership in the encryption space. If Bitcoin is popular around the world, America has become the best carrier of two backups: the US dollar and Bitcoin.
The pioneering role in Stablecoins is the US dollar around the world and enhances people’s confidence in US dollars and enhances demand for it (although indirectly). Moreover, the US dollar Stablecoins are the main buyers of US Treasury, the dollar, and other American assets. The growth of these companies increases the demand for the American currency.
However, the cryptocurrency works mysteriously, and it will be incorrectly claiming that encryption is somewhat increasing or threatening the US dollar.
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2025-07-03 19:27:00
