Experts Warn Weakening Dollar Signals 'Crisis of Confidence' in Backbone of Global Markets

2 months ago 26

Colin Laidley

Tue, Apr 15, 2025, 3:00 AM 4 min read

Andrew Harrer / Bloomberg / Getty Images

The U.S. Dollar Index is connected way to person its worst two-month agelong since 2002.
Former Treasury Secretary Janet Yellen warned connected Monday the simultaneous sell-off of dollars and Treasury bonds could awesome crumbling religion successful the stableness of U.S. assets that person agelong been the backbone of planetary finance.
MUFG analysts successful a enactment connected Monday expressed skepticism that the Trump medication would instrumentality immoderate steps successful the adjacent word to enactment up assurance successful the dollar.

The U.S. dollar is connected way to person its worst period successful years, a improvement that has alarmed immoderate experts disquieted astir crumbling religion successful U.S. fiscal stability.

The U.S. Dollar Index has declined much than 4.3% since the commencement of the month. If the scale held dependable for the remainder of April, it would beryllium the U.S. dollar’s worst period since November 2022 and its ninth-worst since 2000. With March’s 3.2% decline, the dollar is connected way to person its worst two-month agelong since 2002.

The dollar’s diminution has puzzled marketplace watchers, including erstwhile Treasury Secretary Janet Yellen, who called the caller moves successful the world's reserve currency portion of “a precise antithetic pattern” during an interrogation with CNBC connected Monday.

Yellen explained that investors thin to gravitate to harmless havens similar U.S. Treasury securities during times of marketplace uncertainty. Increased request for Treasurys, she said, usually boosts the dollar since Treasury bonds tin lone beryllium traded successful dollars. But precocious Treasury yields person skyrocketed and the dollar has declined.

“And what that suggests is that investors are opening to shun dollar-based assets, and [are] calling into question the information of what is the bedrock of the planetary fiscal system, namely U.S. Treasurys,” said Yellen.

Experts person respective theories astir wherefore investors aren’t flocking to Treasurys amid each the marketplace turmoil. Some person speculated it’s due to the fact that tariffs endanger to substance U.S. inflation, which would unit the Federal Reserve to support involvement rates elevated. Another imaginable crushed is reduced request from planetary investors and different countries spooked by the Trump administration’s unpredictability and hostility to the planetary order.

Some person speculated that China, 1 of the largest overseas owners of Treasury debt, is dumping its bonds to retaliate against Trump. There’s precise small information disposable to enactment that theory, according to a probe enactment from MUFG published Monday. Though they enactment China has reduced its Treasury holdings by astir 25% since the extremity of 2021, “possibly anticipating what lies ahead.” China has besides been a large advocator for planetary de-dollarization.