Don't Count the US Dollar Out Just Yet

Reports of the dollar's demise are greatly exaggerated.

- Jeff Sommer

It's true that the greenback has lost some value in 2025, and that the Trump tariff shock has a lot to do with it.

And I can't deny that when you measure the dollar using common comparisons, it has fallen sharply: almost 9 percent this year against the euro. The US Dollar Index, a widely followed metric that compares the dollar with six currencies, has fallen almost 8 percent.

The swelling US budget deficit has made many investors wary of US government bonds. What's more, the tariffs and Mr. Donald Trump's disregard for the traditions of international diplomacy have damaged the status of the dollar and the US Treasury bond as linchpins of the world financial system. The euro, German bonds, and gold have benefited from the dollar's problems, accelerating trends underway for years. None of this is positive for the dollar.

Yet from other angles, the dollar looks stronger. It has held its own against many currencies and remains highly valued, even after its recent decline. Most important, perhaps, is that there is no single replacement currency in sight. Like it or not, the dollar and the US Treasury bond are essential in world commerce and finance. They remain essential for investors, too.

Hedging your bets by holding assets around the world makes a great deal of sense. The euro, in particular, may well play a more important role in the future than it has over the last 20 years.

But don't go too far with this. It's too early to give up on the dollar or US Treasuries.

SOME PERSPECTIVE