The US dollar has fallen to its lowest level in three years, with currency experts pointing to President Donald Trump’s policy agenda as a key driver behind the decline. The greenback has weakened sharply against major currencies in recent weeks, reflecting mounting investor concern over fiscal discipline, political instability, and a recalibrated approach to global trade and diplomacy.
The dollar index, which measures the currency against a basket of global peers, dropped below 95 on Tuesday, its lowest level since early 2022. Analysts cite a combination of factors behind the fall, but many agree that the Trump administration’s current economic direction is exerting downward pressure.
“Markets are adjusting to a more insular, inflationary US policy stance,” said Melissa Tang, head of foreign exchange strategy at BNY Mellon. “From deficit-financed tax cuts to trade friction and a more confrontational tone with the Federal Reserve, the environment has become far less supportive of the dollar.”
Since returning to othe ffice in January, President Trump has doubled down on protectionist trade measures and tax relief, including sweeping tariff increases on Chinese imports and a rollback of corporate tax reforms. While these policies have boosted certain domestic industries, they have also sparked fears of rising inflation and a widening fiscal deficit — conditions that typically weaken currency confidence.
Moreover, Trump has repeatedly clashed with the Federal Reserve over interest rate strategy, publicly criticising the central bank for keeping rates too high. Although the Fed has signalled it will act independently, markets are pricing in increased political risk and a potential weakening of institutional credibility.
Foreign investors, traditionally drawn to US Treasury bonds for safety and yield, are reportedly scaling back exposure. “The US is looking less stable from a macro perspective,” said Jean-Claude Moreau of BNP Paribas. “The dollar is losing its defensive appeal just as global markets are searching for reliability.”
Another factor adding to dollar softness is the shift in global capital flows. With stronger-than-expected growth in the eurozone and Japan, and interest rate cuts in the US on the horizon, investors are increasingly diversifying away from dollar-denominated assets. Meanwhile, gold and cryptocurrencies have seen renewed interest as alternative stores of value.
While the weaker dollar may benefit US exporters by making American goods more competitive abroad, it raises costs for consumers and importers, potentially adding inflationary pressure. It also complicates efforts by the Treasury and Federal Reserve to maintain price stability and global confidence.
For now, currency strategists warn that unless the administration provides clearer signals on fiscal discipline and institutional respect, the dollar could continue to drift lower. “The president’s political posture matters,” said Tang. “And right now, global markets are not reassured.”
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