What to Do About the Dollar

IF you're like most investors, you have spent little or no time thinking about the dollar. Start worrying. Lately, the dollar has been dropping sharply in value against other currencies.

- JAMES K. GLASSMAN

The primary U.S. Dollar Index (symbol DXY), which goes by the nickname “Dixie,” measures the U.S. currency against a basket of six others: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The euro carries by far the most weight in the basket.

Dixie has been sliding since the beginning of 2025, falling from 109 on the index to just below 100. But currency fluctuations aren’t unusual. In this century, the Dollar Index has bounced between 72 and 118. In 2008, the euro hit $1.57, and by 2022 it had fallen below parity with the dollar, at 98 cents. Now, one euro costs $1.13. (Prices and other data are through May 31; investments I like are in bold.)

The dollar’s fall has been especially troubling because inflation appears to be constrained and the economy over the past few years has been strong. There are several reasons for the decline. Tariffs top the list. Normally, higher tariffs should strengthen the dollar by making foreign products less attractive. “Currency appreciation is a common impact of tariffs,” says the Tax Foundation. But in this case, a chaotic, on-again, off-again tariff policy and ensuing court battles have caused deep uncertainty about U.S. economic policy in general, making investors shy away from the dollar.

Chaos typically favors the dollar as foreigners flee to the U.S. currency—mainly through purchases of U.S. Treasury securities—because they see the United States as a safe haven in a storm. But that’s not happening. Quite the opposite.

Why? Because the economic chaos, including the extreme volatility of the stock market, is attributed to actions of the U.S. itself. The dollar rose in value immediately after 9/11 and during the worst of COVID. No one blamed U.S. economic decisions for those disasters. But now, the world’s investors are concerned about the trade wars that the U.S. has ignited and about something else: the federal deficit.