Dollar Suffers Worst First‑Half Slump In Over Half A Century As Trump Tariffs, Yawning Fiscal Deficit Dent Appeal

The U.S. dollar has staged a marginal recovery after Tuesday’s lows, although it remains at relatively depressed levels. 

On Tuesday, the U.S. Dollar Index, which measures the value of the greenback against a basket of major global currencies, fell to 96.33, the lowest level since Feb. 22, 2022.

The Invesco DB US Dollar Index Bullish Fund (UUP), an exchange-traded fund (ETF) that tracks the Deutsche Bank U.S. Dollar Long Future Index, is down approximately 9% year-to-date. Retail sentiment on Stocktwits has also dipped to ‘neutral’ from ‘bullish’ at the start of the year.

The dollar index has since then come off this level and traded up 0.09% at $96.86 in the early European session.

The index is down nearly 11% year-to-date. According to a New York Times report, the losses at the halfway mark of the year were the steepest since 1973, which occurred after President Richard Nixon ended dollar convertibility to gold and implemented wage and price controls, leading to the end of the Bretton Woods system.

This time around, President Donald Trump has played a significant role in the dollar's decline. The weakness of the currency intensified after he announced sweeping tariffs, which threatened to derail the global economy.

With the July 9 deadline for the resumption of the temporarily halted tariffs approaching, investors are wary about their impact on domestic growth and inflation. 

The prospect of the U.S. Federal Reserve embarking on a rate-cutting spree, the ballooning trade deficit, and the move towards a dollar alternative by the rest of the world, especially the Asian and developing nations, have accelerated the decline.

The Times report also took a different perspective on the U.S. stock market rally, delaying the ongoing uncertainties. The S&P 500 Index’s 24% gain from the post-tariff lows in April becomes a much more modest 15% if the returns are converted from the dollar to the euro.

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