The US Dollar Index has fallen to its lowest point in three years, prompting warnings from Deutsche Bank that foreign investors are losing faith in the greenback’s reserve currency status. The decline is attributed to the ongoing tariff uncertainty and confidence-shaking moves in stocks and bonds.
According to analysts, this development poses a significant threat to US economic sustainability. With the dollar no longer considered a safe haven, countries may reevaluate their dependence on it. This could lead to reduced flexibility for the US administration in pursuing expansionary fiscal policies to support growth.
Deutsche Bank warns that the steady state level of sustainable US fiscal deficits is decreasing, making it harder for policymakers to implement economic stimulus measures. Analysts believe that a more conciliatory stance in international relations will be necessary to maintain stability in the bond market.
However, there is a silver lining: a falling dollar could lead to cheaper asset valuations, drawing foreign investors back into the market. The US administration’s long-term goal of weakening the dollar to promote exports remains unchanged, but the current trajectory suggests that foreign investors are no longer on board with this strategy.
Source: https://www.businessinsider.com/us-dollar-vs-dxy-drop-debt-deficit-spending-trump-tariffs-2025-4