Is Trump Comparable to Nixon? The Dollar Records Its Worst Half-Year Since 1973

The US dollar faced its worst start since 1973 in the first half of 2025.

In the first six months of this year, the dollar index fell by as much as 10.8%. This measure of the dollar's strength against a basket of six currencies, including the British pound, euro, and Japanese yen, recorded its worst year-to-date performance since the end of the gold standard Bretton Woods system in 1973, and the weakest performance for any six-month period since 2009.

In the first half of 1973, the dollar recorded a historic decline of 14.8% when Richard Nixon was President of the United States.

Trump's trade and economic policies are prompting global investors to rethink their exposure to this dominant currency and turn to alternative options. Among them, the euro has risen 13% against the dollar to above $1.17, breaking Wall Street's parity forecast at the beginning of the year.

“The dollar has become the scapegoat for Trump 2.0's erratic policies.” ING foreign exchange strategist Francesco Pesole pointed out that Trump's erratic tariff wars, the massive borrowing needs of the United States, and concerns about the independence of the Federal Reserve have all weakened the dollar's appeal as an "investment haven" for investors.

On Monday, the dollar fell again by 0.6% as the U.S. Senate was preparing to vote on amendments to Trump's "Great Beautiful Act." This landmark legislation is expected to increase U.S. debt by $3.2 trillion over the next decade, raising concerns about the sustainability of Washington's borrowing and triggering a sell-off in the U.S. Treasury market.

Market Expectations Reversed Significantly

The continued decline of the dollar has dashed widespread predictions made at the beginning of the year. At that time, it was generally believed that Trump's trade policies would cause greater damage to economies outside the United States while pushing up U.S. inflation, thereby strengthening the dollar's advantage over other currencies.

However, the reality has been quite the opposite. Several Wall Street banks had previously predicted that the euro would fall to parity with the dollar this year, but the euro has actually risen by 13%, climbing above $1.17. Investors are beginning to focus on the growth risks of the world's largest economy while demand for safe assets in other regions, such as German bonds, is increasing.

Andrew Balls, Chief Investment Officer of Global Fixed Income at Pimco, stated: “In terms of the U.S. policy framework, you have been hit on the ‘liberation day’ of tariffs.” "He was referring to the 'reciprocal tariff' policy announced by Trump in April.

Another factor driving the dollar lower this year is the market's increasing expectation that the Federal Reserve will cut interest rates more aggressively to support the U.S. economy—Trump has also repeatedly urged for rate cuts. According to the implied levels of futures contracts, at least five rate cuts of 25 basis points each are expected by the end of next year.

Bets on lower interest rates have helped the U.S. stock market shake off concerns over trade policy and conflicts in the Middle East, reaching a historic high on Monday. However, the weakening dollar means that when returns are measured in the same currency, the S&P 500 continues to lag far behind its European counterparts.

Global Capital Allocation Quietly Shifts

Large investors, from pension funds to central bank reserve management agencies, have expressed a willingness to reduce their exposure to the dollar and U.S. assets, questioning whether the dollar can still provide a safe haven against market volatility.

Andrew Balls, Chief Investment Officer of Global Fixed Income at bond group Pimco, stated that while the dollar's status as the de facto global reserve currency is not under significant threat, "that does not mean the dollar won't experience a substantial decline." He emphasized that global investors are turning to hedge more dollar exposure, and this activity itself will push the dollar lower.

Pesole from ING pointed out, "Foreign investors are demanding more foreign exchange hedging for dollar-denominated assets, which is another factor preventing the dollar from following the rebound of U.S. stocks."

Meanwhile, gold has also reached a historic high this year, with central banks and other investors concerned about the depreciation of dollar assets continuing to buy