The US Dollar Between Pressures and Policies.. A Currency Seeking a New Balance

The US dollar has witnessed a noticeable decline in its performance since the beginning of this year, amid increasing political and economic uncertainty since President Donald Trump took office for his second term.
Although the currency experienced a brief recovery following his re-election, when investors viewed his policies as supportive of growth and the business sector, that confidence did not last long, as it quickly dissipated with his first economic decisions.


Isolationist Decisions and Rapid Consequences

The dollar index began to decline after mid-January, affected by Trump's protectionist and isolationist economic policies, foremost among them the imposition of new tariffs.
These decisions led to a decline in investor appetite for US assets, and increased fears of slowing growth and rising inflation, which directly reflected on the performance of the greenback in global markets.


Largest Decline in Five Decades

According to economic data, the dollar lost about 11% of its value during the first half of 2025, marking the largest decline recorded during this period in over fifty years.
The dollar index reached 98.31 points as of October 7, while Morgan Stanley expects the decline to continue to around 91 points by mid-2026.


Limited Recovery and Ongoing Downward Trend

Despite some signs of improvement in early October, when the dollar rose slightly after its drop in September to about 96 points, the overall trend still indicates a clear downward trajectory.
Economic reports from major US banks and research centers suggest that the ongoing political and economic uncertainty will push investors to diversify their portfolios away from the dollar in favor of more stable currencies.


Internal Challenges Deepening the Crisis

The currency's decline also resulted from Trump's controversial economic policies, particularly those related to taxes and tariffs, prompting investors to shed dollar-denominated assets.
Additionally, the president's repeated criticisms of the Federal Reserve regarding its monetary policies, along with the dispute over the tax bill and the government shutdown that began in early October, weakened confidence in the US economy.