Lower dollar value makes US exports more competitive and boosts foreign earnings for domestic firms
The greenback saw its sharpest one-day decline this week since President Donald Trump announced “Liberation Day” tariffs in April.
The US dollar index has already shed 2.2% against other currencies this year, following a 9% drop in 2025. The downward trend is what economists are calling a “double-edged sword.”
Lower dollar value makes US exports more competitive and boosts foreign earnings for domestic firms when foreign currency is converted to USD. At the same time, it increases import costs, affecting investor confidence.
Weakening of the currency also reflects economic struggles in America, where inflation is hitting the spending of lower-income households while the wealthy remain unaffected.
Some analysts are bullish that the dollar is still trading at a premium despite recent losses. Others point out that capital is moving away from the AI boom in US tech companies to international markets. Several economists say the USD has entered bear market territory.
The dollar’s recent plunge came after Trump said he is not worried about the currency’s decline and that he wants the USD to find its own level.
While it briefly recovered the following day after Treasury Secretary Scott Bessent said the administration was committed to a strong dollar, investor unease persists over the longer term.
Geopolitical tensions, including Trump’s recent clash with European allies, are raising doubts about America’s future role in global finance. At the same time, investors are worried that Fed rate cuts could stoke inflation.
The dollar slump persists even as fellow safe havens, such as gold and the Swiss franc, surge in value.