The Dollar Posted its Worst First-Half Performance Since Nixon was President
On Monday, the US Dollar Index ended the first half of the year 10.8% lower. That’s its worst first-half performance since 1973, when Richard Nixon was president. At the time, the index fell 14.8%.
On Tuesday, the US Dollar Index was 0.1% lower at 96.75 at 12:57 a.m. ET. The index measures the greenback against a basket of six major currencies.
The sharp decline is a surprising turn for a currency typically seen as a safe haven in uncertain times.
Analysts have attributed King Dollar’s slump to the “Sell America” trade, as investors dumped US assets, including stocks and Treasurys, in response to President Donald Trump’s trade war.
Slower economic growth, political uncertainty, and rising fiscal concerns have contributed to the dollar’s slide.
Vishnu Varathan, Mizuho’s head of macro research for Asia, excluding Japan, wrote on Tuesday that the greenback is under pressure from President Donald Trump’s “big beautiful bill.”
The bill, which is pending a vote in the Senate, is stoking concerns about an additional $3.3 trillion to the US’s deficits over a decade, according to a new estimate from the nonpartisan Congressional Budget Office.
“An unsustainable debt path is a key motivator of the ‘Sell America’ narrative that has compromised USD and USD assets,” wrote Varathan.
Meanwhile, pull factors in other parts of the world are enticing investors, according to Sami Pepin, a fixed-income strategist at Lombard Odier, a Swiss private bank. They include defense and government spending plans in the euro zone and better stock performances elsewhere.
“Combined with broad-based concerns about global investors’ high exposure to US assets, the result is strong negative USD sentiment, with limited respite,” he wrote.
Despite the dollar’s weakness, US stock markets have recently hit record highs. Treasurys have also made some recovery since their selloff in recent months.
The conflict is not irreconcilable, as investors appear to be hedging, not selling, the US market, according to Varathan.
“A naked ‘Sell America’ position can be a costly endeavour,” he wrote.
“Hedging for US risks via a bearish USD while being invested in US equities and USTs may be the compelling play for a while yet,” he added.
A weaker currency isn’t all negative for the US.
It’s good for exports, which translates into profits and sales for US companies overseas. However, it means imports could get more expensive — and even stoke inflation.
More immediately, summer vacations abroad could get more expensive for travelers.
The dollar’s decline means that it has been losing ground against major currencies, including the euro and the British pound.
On Monday, the dollar hit a four-year low against the euro.
Asian currencies have also made broad gains against the dollar, with the Japanese yen 9.3% higher this year.
