The US dollar has plummeted 0.7% today, marking its fifth consecutive day of decline, as the market reevaluates the currency's standing in the global economy.
The DXY index, which monitors the dollar's value relative to a basket of currencies, sank to its lowest level in three years during trading today, as reported by .
Since the beginning of April, which Trump hailed as 'Liberation Day,' the dollar index has dropped by more than 4% as investors offload their US assets amid concerns over the country's growth prospects.
In a statement on Friday evening, President Trump emphasized that the dollar would invariably remain "the currency of choice" and asserted that "if a nation said we're not going to be on the dollar, I would tell you that within about one phone call they would be back on the dollar".
However, Michael Brown, senior research strategist at Pepperstone, cautioned about the risk "of moving away from a decades-long period of dollar and US hegemony."
Brown acknowledged that currently, there is no alternative to the dollar as a reserve currency, and the tariffs that shook confidence in the dollar last week have been temporarily suspended.
"However, the incoherence with which economic policy is being made, coupled with the credibility erosion caused by president Trump's constant u-turns and 'governing by tweet' modus operandi, is clearly creating more than a few jitters," the strategist noted.
Brown conceded that there was no alternative to the dollar as a reserve currency for now and that the tariffs which shook confidence in the dollar last week had been put on hold for the time being. "Fundamentally, even though the ridiculous 'reciprocal' tariffs have been paused (for now), the prospect of those levies being imposed again will continue to linger.
"De-dollarisation is now a real, and frankly scary, prospect," Brown commented.
US dollar hit by China tariffs
The US dollar took a hit due to imposed China tariffs, according to insights shared on Friday by ING analysts. They indicated that Trump's escalating tariffs on China contributed to the dollar's sharp decline.
Since the US may find it challenging to quickly replace many of the imports from China, this could lead to heightened inflationary risks for the American currency.
The euro has emerged as the biggest winner from the dollar's depreciation, achieving a five percent increase since 'Liberation Day'. It is perceived widely as one of the few options for investors moving away from US assets.
ING analysts observed that officials at the European Central Bank appear to be promoting the euro as a robust alternative to the US dollar right now.
Meanwhile, despite global economic uncertainties which have affected the º£½ÇÊÓƵ, the pound has seen some growth, albeit not as strong as other currencies. Still, it has managed to gain two percent against the dollar in the past fortnight.
