Dollar posts worst first-half performance since 1973... What are the reasons?

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For decades, the US dollar has maintained its position as the world's primary reserve currency, a symbol of the economic and political power of the United States. But with the beginning of 2025, this cohesive image began to crack, amid sharp fluctuations that worried markets and confused economic expectations. This remarkable shift coincided with controversial economic and trade policies pursued by the US administration, prompting many investors to reconsider the extent to which they rely on the dollar as a safe haven. At the same time, signs of a change in the balance of global financial power have emerged, amid increasing competition from major currencies and alternative assets that have begun to attract attention. This sudden decline, one of the worst in modern dollar history, raises profound questions about the future of the US currency and its place in the international monetary system. What are the factors behind this poor performance? Is it a coincidence or an indication of a deeper shift in the global economic landscape? Worst performance A report in the British "Financial Times" newspaper indicates that the dollar recorded its worst half-year since 1973, as US President Donald Trump's trade and economic policies pushed global investors to reconsider their exposure to the world's dominant currency. The dollar index, which measures the strength of the currency against a basket of six other currencies including the pound sterling, the euro and the yen, has fallen by more than 10 percent so far in 2025, the worst start to the year since the end of the gold-backed Bretton Woods system. The newspaper quoted Francisco Pesole, a foreign exchange strategist at ING Bank, as saying: "The dollar has become a scapegoat for Trump's unpredictable policies." He added that the US president's tariff war, the huge borrowing needs of the United States, and concerns about the independence of the Federal Reserve have undermined the dollar's appeal as a safe haven for investors. The sharp decline in the dollar puts the US currency on track for its worst first half of the year since it lost 15 percent in 1973 and its weakest performance over any six-month period since 2009. The currency's slide has confounded widespread expectations at the start of the year that Trump's trade war would do more damage to economies outside the United States while fueling US inflation, boosting the currency against its rivals.