2025-09-09
The short answer: yes. As of September 2025, the U.S. Dollar (USD) is undergoing one of its steepest slides in modern history. The dollar index has dropped roughly 10–11% in the first half alone, making it the steepest decline since the floating exchange rate began in 1973.
Weak U.S. labour data, anticipated Federal Reserve rate cuts, record Treasury issuance, and long-term de-dollarisation trends are all significant factors pulling the dollar down.
Global markets are reacting accordingly: gold is surging, emerging markets are rallying, and other currencies are strengthening.
As of August 2025, U.S. job creation slowed to just 22,000 new jobs, with unemployment rising to 4.3%. The labour market softness has markets pricing in a 25–50 basis point Fed rate cut in September, with more easing expected into 2026. [1]
A further decline has resulted from cautions about systemic dangers issued by federal authorities, including Governor Michelle Bowman.
Diminished confidence in the Fed's independence due to political pressure has further dented the USD's safe-haven status.
The U.S. debt-to-GDP ratio is approaching 130%, one of the highest levels in history. Heavy Treasury issuance to fund deficits has pushed bond markets into volatility.
Yields remain elevated, but global investors are increasingly cautious about holding dollar-denominated debt, adding pressure to the USD.
Political stalemate, changes in trade policy, and fiscal irresponsibility have eroded global confidence in the dollar.
Currency traders now see higher risk premia on U.S. assets, driving flows into other currencies and commodities.
A growing number of countries are settling oil, commodities, and trade in currencies other than the USD, including the Chinese yuan and the proposed BRICS settlement framework.
While the dollar remains dominant, its share of global FX reserves has slipped to ~58% (IMF, 2025), down from 71% in 2000.
This gradual diversification is accelerating as geopolitical blocs strengthen outside the U.S. orbit.
Investors are diversifying away from the dollar:
Gold: Surged above $3,600/oz and could reach $5,000 if dollar trust erodes further.
Silver & Copper: Both have rallied on industrial demand and a weaker USD.
Agricultural commodities: Wheat and soy are trading higher as a weak dollar makes them cheaper in global markets.
Crypto: Bitcoin and Ethereum are experiencing new investments as "digital hedges" against fiat currency depreciation, akin to gold.
Dollar Index (DXY): Down 10–11% YTD
Recent Low: DXY touched 97.32, a multi-week trough.
Historical Comparison: Poised for its worst year since 2003, and steepest first-half decline since 1973.
| Factor | 2025 Impact on USD |
|---|---|
| Jobs Data | Weak (22,000 new jobs, 4.3% unemployment) |
| Fed Policy | Expected 25–50bps cut in Sept |
| Debt & Treasury Sales | Debt-to-GDP ~130%, heavy issuance |
| Gold | $3,600/oz, record highs |
| EM Stocks | +20.7% YTD vs S&P +10.5% |
| Dollar Index (DXY) | -10–11% H1 2025 |
1) Gold and Precious Metals
As mentioned above, gold surged above $3,600/oz. Silver and platinum are also gaining as investors hedge against inflation with the dollar weakening. [2]
2) Emerging Markets
The MSCI Emerging Markets ETF is up ~20.7% YTD, far outperforming the S&P 500 (+10.5%), thanks to capital inflows and cheaper valuations.
3) Currency Shifts
Indian Rupee (INR): Strengthened to ~₹88/USD, supported by growth momentum in Asia.
Canadian Dollar (CAD): Stable but pressured by oil volatility.
Chinese Yuan (CNY): More widely used in global settlements, adding symbolic weight to dollar diversification.
Short-Term Outlook: Some analysts (Cambridge Currencies) expect a temporary rebound in late Q3–Q4 2025 if inflation resurfaces or geopolitical shocks lift demand for safe-haven dollars.
Long-Term Outlook: Morgan Stanley projects another 10% slide through 2026, citing narrowing rate differentials and de-dollarisation trends. [3]
Yes. As of September 2025, the dollar has fallen 10–11% YTD, marking its steepest decline in decades.
Key drivers include weak jobs data, rising unemployment, expectations of Fed rate cuts in September and growing concerns about Fed independence and U.S. fiscal stability.
Gold, silver, copper, emerging market equities, agricultural commodities, and cryptocurrencies typically perform well.
Not imminently. The dollar still makes up 58% of global FX reserves (IMF, 2025), but its share is slowly eroding as the euro, yuan, and gold gain ground.
In conclusion, a global power shift in currencies is highlighted by the dollar's steep decline in 2025. Weak U.S. data, dovish Fed signals, fiscal imbalances, and de-dollarisation are all undermining confidence in the greenback.
The next 12–18 months will determine whether the dollar stabilises or continues sliding. Investors should brace for volatility, diversify into gold, emerging markets, and crypto, and closely monitor Fed credibility and U.S. fiscal policy.
For now, the dollar remains the world's dominant reserve currency, but it is under more pressure than at any time in the past two decades.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
[1] https://www.reuters.com/world/middle-east/dollar-slips-7-week-low-jobs-gloom-bolsters-fed-cut-wagers-2025-09-09/
[2] https://www.ft.com/content/05c798a8-6178-4c14-b155-d977ad4b69e9
[3] https://www.morganstanley.com/insights/articles/us-dollar-declines
