Summary
The dollar, the world’s dominant currency, offers nuanced clues about the confidence investors have in the U.S. economy and financial system. The greenback has been in demand since the start of the pandemic, but that started to unwind in 2025. Year to date, the dollar has given back 4% on a global, trade-weighted basis; and 5% compared to an index of advanced economy currencies. Some of the slide is linked to the economic uncertainty caused by trade policies, though reasons also include the swelling U.S. federal debt and the pressure that Donald Trump has put on the Federal Reserve to lower rates. These events raise the risk that the value of U.S. debt will be eroded over time, and is being referred to as the “debasement trade.” In short, investors around the world have started rethinking their commitment to U.S. assets as the cost of doing business in America increases and the balance sheet groans. Still, we would hesitate to say the dollar is at risk of losing its global currency of choice status. It remains 15% — and more than one standard deviation — above its 20-year average value, supported by the depth of a $27 trillion market, not to mention by Fed and the country’s time-tested political/econom