The US dollar has experienced a significant decline, reaching its lowest point in four years, following comments from President Donald Trump that dismissed concerns over the currency’s slump. This downturn has prompted investors to flock to traditional safe havens, such as gold and the Swiss franc, amid rising geopolitical tensions and uncertainty surrounding US economic policy.
A Sharp Decline in Value
On Tuesday, the dollar fell by 1.3% against a basket of major currencies, marking its fourth consecutive day of losses. The decline continued into Wednesday, with an additional drop of 0.2%. This recent downturn represents the largest single-day decrease since April of the previous year, coinciding with tumultuous market reactions to Trump’s tariff proposals.
During a visit to Iowa, where he promoted his economic achievements, Trump responded to inquiries about the dollar’s decline by stating, “No, I think it’s great. I think the value of the dollar – look at the business we’re doing. The dollar’s doing great.” His remarks, however, appear to contradict the growing concerns of investors, who are increasingly wary of the implications of a weaker dollar.
Geopolitical Factors at Play
The dollar has now plummeted by 10% over the past year, reflecting a broader trend influenced by unpredictable US policymaking. Recent threats from Trump regarding potential territorial claims, such as his controversial comments about Greenland, alongside the imposition of further tariffs on European partners, have heightened global market anxiety.
Steve Sosnick, a market strategist at Interactive Brokers, highlighted the dual nature of a weaker dollar, noting, “If you have operations around the world and foreign currency revenue that will have a conversion advantage when you turn it into US dollars, that will be good. On the other hand, it makes imported goods more expensive and there might be some inflationary impact from that.”
Rivals Gain Ground
As the dollar falters, several rival currencies have surged to multi-year highs. The Swiss franc has reached its strongest position against the dollar in over a decade, appreciating by 3% so far this year following a 14% increase in 2025. Additionally, the euro has risen to $1.20, marking a significant milestone and representing its most substantial weekly gain since April of the previous year.
Gold, too, has seen remarkable gains, climbing to record prices above $5,200 (£3,770) per ounce. The precious metal, often viewed as a safe investment during times of uncertainty, has appreciated nearly 90% since Trump’s second inauguration, reflecting a growing preference among investors for stable assets.
The Federal Reserve’s Dilemma
Looking ahead, analysts speculate that the dollar may continue its downward trajectory, particularly in light of ongoing concerns about presidential pressure on the Federal Reserve. The central bank is set to announce its first interest rate decision of the year, with expectations leaning towards maintaining current rates despite Trump’s calls for cuts.
This environment of uncertainty has been exacerbated by Trump’s public criticisms of Federal Reserve Chair Jerome Powell, whom he has labelled as “stupid” and threatened to dismiss. With Powell’s term concluding in May and a criminal investigation into his conduct underway, the potential for leadership change at the Fed could further influence the dollar’s stability.
Why it Matters
The decline of the US dollar has far-reaching implications for the global economy, affecting international trade, inflation rates, and investor confidence. As the currency weakens, rising import costs may contribute to inflationary pressures domestically, while the attractiveness of alternative currencies and commodities like gold could reshape global investment strategies. The interplay between US economic policy and market perceptions will be pivotal in determining the dollar’s future trajectory, making it a critical area for both policymakers and investors to monitor closely.
