In 2025, the US dollar has declined sharply, falling approximately 13% against the euro and over 8% against the Japanese yen. This drop is due to economic policies under Trump 2.0, including aggressive tariffs on imports. The dollar's overvaluation post a decade-long rally and growing economic prospects in Europe and Japan have led investors to shift capital back to their home markets. The aggressive tariffs have created market uncertainty, diminishing US asset appeal, while ballooning US government debt and persistent fiscal deficits added to investor concerns, pushing them towards alternative currencies and gold.
The US dollar has tumbled roughly 13% against the euro and over 8% against the Japanese yen in 2025, primarily due to aggressive tariffs announced by President Trump.
Near 90% of currency transactions occur in dollars, but ongoing U.S. fiscal deficits and a rise in government debt to 124% of GDP have caused investor wariness.
A combination of euro strength and a trade environment shaped by tariffs is expected to be 'painful' for European exporters, with them facing reduced competitiveness.
As the U.S. dollar weakens, there is a rise in demand for currencies like the euro, yen, and Swiss franc, alongside gold, demonstrating shifts in investor sentiment.
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