US Dollar Plummets 10% in 2025 Amid Fiscal Concerns

The US dollar has experienced a significant decline in 2025, marking its sharpest six-month drop since 1973. The currency has fallen more than 10% in the first half of the year, sparking concerns about the country's fiscal path, political volatility, and eroding global economic dominance. This dramatic fall has led to a shift in investor sentiment, with many turning away from the dollar and towards other currencies, particularly in Asia.

The decline of the US dollar has been attributed to several factors, including growing unease about the country's fiscal path and political volatility. The widening U.S. deficit and revived tariff turbulence have also contributed to the dollar's weakness. The euro, for instance, has seen a significant climb against the US dollar, tumbling roughly 13% against the euro and over 8% against the Japanese yen since January. This dramatic fall reflects growing unease about the country's fiscal path, political volatility and eroding global economic dominance. The narrative of “US exceptionalism” is fading, with global economies, particularly in Europe and Asia, showing signs of catching up.

Experts suggest that various economic and political developments are causing the rapid depreciation of the dollar. Uncertainties in trade policies, rising tariffs, threats to the independence of the US Federal Reserve, increasing US debt, and inflation worries are contributing factors to the dollar’s weakness. These developments lead to a loss of confidence among investors and complicate the dollar’s role in the global markets. The value of the dollar has been declining since President Donald Trump took office. Some leading researchers emphasize that uncertainties in trade policies have negatively impacted the markets. The trigger has likely been uncertainties related to policy outlooks, particularly in trade, and the erratic nature of the policy-making process.

There are longstanding structural issues related to the dollar’s depreciation that remain relevant. The loss of confidence in US trade, fiscal, and security policies along with political interventions are seen as factors that could weaken the dollar’s reserve currency status. By all metrics, the dollar remains the dominant store of value, medium of exchange, and unit of account globally. However, distrust in US trade, fiscal, and security policies and political interventions regarding the Fed’s independence may accelerate the dollar’s decline as the primary reserve currency. Experts note that under current conditions, the risk of the dollar losing its international reserve currency role is increasing. The dollar index is currently around 97.03, and this situation may influence portfolio diversification decisions for central banks and major investors.

This decline in economic indicators has raised new questions about the US’s traditional leadership in the global financial system. Both unpredictable policy decisions and the increasing debt burden contribute to uncertainties about the future stability of the dollar. Meanwhile, the weakening of the dollar might have a multiplying effect on the rise of cryptocurrencies. If market uncertainties decrease somewhat, cryptocurrencies could finally enter the rise phase they have long anticipated, turning this period to their advantage.

The historic depreciation of the US dollar in the first half of the year marks a significant turning point concerning policy uncertainties, debt dynamics, discussions on central bank independence, and impacts on the global economy. This process highlights new challenges and necessitates cautious and informed steps by financial decision-makers regarding the dollar’s future role and global economic balances. Investors and policymakers are expected to closely follow these developments to stay informed about potential risks and opportunities in exchange rates.