Dollar’s Steep Fall: Hedge, Hold, or Hope for a Recovery?
US President Donald Trump on the roof of his Oval Office on Tuesday! (Image The White House)
With the US dollar down 15% YTD—its sharpest drop in over five decades—investors weigh gold, global markets, and policy shifts. Is this a temporary shock or the start of a structural decline?
By S JHA
MUMBAI, September 22, 2025 — The US dollar is enduring its most dramatic year since 1973. A 15% year-to-date slide (FT, LSEG)—its worst in over five decades—has rattled global markets, reshaped portfolios, and stoked debate from Wall Street to Washington.
Spencer Hakimian captured the sentiment bluntly on X: “The Dollar’s collapse has been unprecedented.” Unprecedented might be an overstatement.
After all, the Plaza Accord of 1985 also triggered a 15% decline. But what makes 2025 stand out is speed and scale.
Tariffs and aggressive Federal Reserve rate cuts (Fed minutes, Sept 17, 2025) have amplified the selloff. The fallout is visible everywhere: gold up 18%, global equities shedding $5.4 trillion (IMF), and US imports rising 5% even as inflation sticks at 3.2% (BLS).
For investors, the question is not just why but what next. History offers perspective—1987 saw GDP rebound by 4% post-Plaza—but timing matters. Markets are split.
- Hedge with gold: The surge echoes past crises, where safe-haven demand preserved wealth.
- Diversify abroad: Undervalued equities in foreign markets may present opportunity amid dollar weakness (Morningstar).
- Track policy shifts: Adjustments in tariffs or Fed guidance could trigger stabilization, just as prior interventions did.
Critics warn against panic. Some analysts argue the dollar remains overvalued in purchasing power terms (Value Seeker), while others point to its long-term uptrend still intact (Beyond-Charting). Yet the market’s psychology is unforgiving—sentiment often swings harder than fundamentals.
The Financial Times summed it up: “In the Trump 2.0 era, the dollar is taking the strain.” Investors must decide whether this is noise masking resilience—or the start of a paradigm shift in global finance.
For now, the dollar is testing a 14-year support line (Barchart). If it holds, history repeats. If it breaks, history could be rewritten.
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