Following a spectacular 2025, when US President Donald Trump’s tariff proposals drove the dollar to plummet, currency traders anticipated a quieter year. Recent weeks have broken that complacency. The dollar sank to its lowest point in four years versus a basket of currencies on Tuesday, hitting multi-year lows against the Euro and the pound after falling 3% in just a week.
Although the downturn has eased, analysts believe this is only temporary.Most people believe the dollar will drop further this year,” said Chris Turner, ING’s global head of financial market research. “The jury’s out on the timing but less so on the direction.”
A weakening currency reduces Americans’ purchasing power, as international tourists are well aware. Analysts warn that if this trend continues, it will fuel inflation in the United States as Americans confront increased import prices. The declines have also aroused concerns about the dollar’s standing as the world’s reserve currency, which has helped keep borrowing costs in the United States low for decades.
The dollar has been weakening after more than a decade of strength, with particularly significant gains between 2020 and 2022, when America’s post-pandemic recovery and relatively high interest rates fuelled investor demand for the currency.
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