The U.S. dollar is falling largely due to a combination of factors including slower U.S. economic growth, rising deficits, policy uncertainties, and changes in global capital flows. Despite the Federal Reserve holding rates steady while other central banks cut theirs, worries about U.S. fiscal policies, such as large government spending bills and uncertainties around Federal Reserve independence, have led to investor reassessment and reduced demand for dollar assets. Additionally, expectations of potential future rate cuts due to a weakening economy have contributed to the dollar's depreciation. There is also a global reallocation of capital away from U.S. assets, with investors, especially from Europe, increasing their investments in local markets instead. Furthermore, geopolitical and trade-related uncertainties have reduced the dollar's safe-haven appeal. This decline has been the worst for the dollar in over 50 years for the first half of 2025, with the dollar falling over 10% against major currencies.
