The US dollar has fallen over 10% this year, its largest decline since 1973, amid concerns of de-dollarization – the shift away from dollar-denominated assets due to uncertainty in US fiscal policy. Experts warn that this trend could weigh on stocks and economies.
Mohamed El-Erian, former PIMCO CEO, says “policy-induced uncertainty” is driving de-dollarization, which could lead to stagflation if not managed. However, he notes there’s no real alternative to the dollar, so investors can only reduce their exposure to it gradually.
Analysts at Vanguard say recent weakness leaves the dollar at a fair value and that upside comes from trade deals and policy in the near term. Productivity and higher rates support dollar valuations in the long term. They stress the importance of global diversification, particularly as US equities valuations are stretched.
The decline in the dollar’s value could mark the end of its “great unwind” of the past decade, when exposure to America was considered the safest investment. Investors are now hedging their bets, and experts warn of a potential reset that could lead to more efficient markets but also stagflation if not managed carefully.
Source: https://www.axios.com/2025/07/25/trade-tariffs-dollar-weakness