The dollar has its worst half-year in more than half a century: FT

The dollar remained weak against major currencies in the first half of the year, targeting its lowest level in three years and its lowest performance in more than half a century, due to Donald Trump's trade policies.

The dollar's weakness against currencies like the euro, yen, Swiss franc, and Canadian dollar has prompted global investors to rethink their exposure to the world's dominant currency, according to the British Financial Times.

"The dollar has become the scourge of Trump 2.0's erratic policies," said Francesco Pesole, a strategist at ING, as quoted by the newspaper.

The Intercontinental Exchange's Dollar Index (DXY), which measures the greenback against a basket of six benchmark currencies, fell 0.23% to 96.66 points on Tuesday. This result marks its lowest level since February 25, 2022, when it closed at 96.61 points.

Its performance has been disappointing, with a 10.90% drop in the first half of the year, surpassed only by the 15% collapse recorded in 1973, the newspaper reported.

This collapse of the dollar represents the worst six-month period for the currency since the collapse of the Bretton Woods system.

The DXY is a weighted average of the nominal exchange rate of six major currencies: the euro, the Japanese yen, the pound sterling, the Canadian dollar, the Swedish krona, and the Swiss franc.

Against major currencies, the dollar has lost ground in the first six months of the year. The euro appreciated 12.31%, the yen gained 8.77%, the pound sterling gained 9.86%, the Canadian dollar 5.11%, the Swiss franc 12.78%, and the Swedish krona 14.23%.

“The tariff war, the US's massive borrowing needs, and concerns about the Federal Reserve's independence have undermined the dollar's appeal as a safe haven for investors,” the FT writes.

Weakness for the dollar is foreseen

"The dollar has been under pressure during the first half of the year, and we expect continued depreciation in the second half," Wells Fargo analysts predicted in a research note.

They added that if the Fed cuts rates faster than most of its G-10 peers, “the moderation in US economic trends and the easing of trade tensions should contribute to a weaker dollar in the coming quarters.”

However, they predicted that the dollar could reverse course and strengthen in 2026, as monetary policy and growth trends favor the United States.

Experts from Oxford Economics highlighted in a study that the dollar has lost more than 10% of its value against major floating currencies since its January peak. "Initially, this was part of a coordinated sell-off in US assets. However, the dollar's weakness continued even after stocks rallied despite rising bond yields."

They added that the combination of a weakening currency and rising yields is unusual and more closely resembles the pattern one would expect in a struggling emerging market.

"In the current context, the dollar market has shown notable weakness against major currencies. This trend is largely due to the anticipation of interest rate cuts, which have been suggested by Jerome Powell's recent statements," said Felipe Mendoza, Financial Markets Analyst at ATFX LATAM.