The U.S. dollar continues to weaken and has suffered its worst decline in 52 years.
The greenback, as the American currency is known, has fallen 10.7% against a basket of other currencies, marking the worst first half to any year since 1973.
The last time the U.S. dollar declined this much, Richard Nixon was president and the Vietnam War was still raging.
The 1973 decline also occurred as the U.S. abandoned the gold standard and decided to let the dollar float rather than be pegged to the price of bullion.
Now, analysts and currency traders say the U.S. dollar faces a variety of headwinds heading into the second half of this year that could result in further declines.
Erratic policies, tariff volatility, rising debt and deficits, and potential interest rate cuts from the U.S. Federal Reserve could all conspire to push the American dollar lower in coming months.
Some analysts say that the decline in the greenback reflects a growing loss of confidence in the U.S. around the world.
The dollar’s decline began in mid-January on the eve of U.S. President Donald Trump’s second term and has continued to slide lower throughout this year.
To be sure, a weaker dollar helps make American exports cheaper and can provide a boost to U.S. companies amid President Trump’s ongoing trade wars.
However, there are growing concerns about the potential end of American exceptionalism and dollar hegemony, with the public share of U.S. debt nearing $30 trillion U.S. and the 2025 deficit on track to reach $2 trillion U.S.
Should American assets such as the dollar and government bonds (Treasuries) lose their prominence, it would have a big impact on risk assets like stocks and cryptocurrencies.
As the U.S. dollar slides lower, gold is off to its best first half to any year since 1979.
Central banks around the world are ramping up their gold purchases to about 24 tons per month, according to the World Gold Council. Gold is viewed as an alternative to U.S. assets.
The U.S. Federal Reserve could exert more downward pressure on the U.S. dollar in coming months should it lower interest rates as expected in the back half of this year.
