The dollar index fell over 1% to 99.2 on Friday, its lowest level in nearly three years, as investors continued to pull out of US assets amid escalating global trade tensions and growing concerns over the broader economic fallout—particularly for the US.
Dollar slides to three-year low
The steep drop in the dollar reflects mounting anxiety that the ongoing trade war could significantly damage the US economy, further weakening investor confidence in US financial markets. On Friday, China’s finance ministry announced plans to raise tariffs on US imports to 125%, up from the previous 84%, in direct retaliation for Washington’s decision to hike tariffs on Chinese goods to as much as 145%. This move by China added to the growing sense of uncertainty, as the two countries continue to escalate their trade conflict, with no clear path toward a resolution in sight.
Additionally, the US maintains a 10% tariff on imports from most countries, alongside a 25% duty on steel, aluminum, and autos, further straining international trade relationships and exacerbating concerns about the long-term economic effects of these protectionist measures. Although President Trump’s announcement of a 90-day truce briefly lifted hopes for renewed trade negotiations, it did little to alleviate growing fears of a recession, particularly as trade tensions show no signs of abating. These fears have intensified as investors worry that the global economy, particularly in major economies like the US and China, could face a prolonged period of slower growth.
Dollar weakened mostly against the euro and the yen
As a result, the dollar weakened mostly against the euro and the yen, and dropped to a 14-year low against the Swiss franc, a traditional safe-haven currency. The decline in the dollar reflects a broader risk-off sentiment in the markets, as investors flock to safer assets amid concerns about the global economic outlook. On the week, the dollar sank 2%, putting it on track for its biggest weekly decline since November 2022. The continued deterioration in the dollar comes as traders adjust their portfolios in anticipation of further economic disruptions and possible shifts in US monetary policy. With ongoing trade tensions, rising inflationary pressures, and mounting recession fears, the outlook for the dollar remains uncertain, and further weakness is possible in the short term.
