The recent depreciation in the US dollar has become one of the important headings of the global financial agenda. According to the report published by S&P Global, the US Dollar Index declined by about 10.8 %in the first six months of the year. This is recorded as the harshest first half decline since 1973. It is stated that the index has been at the lowest levels since February 2022, while experts believe that the weakening of the dollar may continue in the coming period. The slimming in the dollar has always been positive for crypto currencies.
US Dollar Index
It is stated that there are various economic and political developments behind the rapid depreciation of the dollar. The S&P global report states that uncertainties in trade policies, increasing customs tariffs, threats to the independence of the US Federal Bank, rising US debt and inflation concerns are effective in the weakening of the dollar. These developments lead to loss of confidence among investors, making the role of dollar in global markets controversial.
After US President Donald Trump started to work, the dollar’s depreciation process accelerated. Some leading researchers point out that uncertainties related to trade policies adversely affect the markets. MUFG Bank Research Director Derek HALPENY summarizes this situation with the following words:
“The trigger of the movement may have been the uncertainties regarding the policy appearance in the field of trade, and also the irregular nature of the policy -creating process.”
Reserve money status and crypto currencies
The structural problems spread to the dollar to the depreciation of the dollar also remain on the agenda. According to Elias Haddad, a global macro strategist from Brown Brothers Harriman, the loss of confidence in trade, finance and security policies and political interventions are among the factors that may weaken the reserve money status of the dollar.
“With all indicators, the dollar is dominated as a value storage tool, change environment and account unit. However, the insecurity of the US trade, finance and security policies and political interventions on the independence of the Central Bank may accelerate the decline of the dollar as primary reserve money.”
Experts say the risk of decreasing the dollar in the international reserve money role in the current conditions. While the dollar index is at the level of 97.03 as of the moment, it is pointed out that this situation may be effective in portfolio diversification decisions for central banks and large investors. As a matter of fact, we have recently mentioned how much the share of the dollar has decreased in the reserves of the central banks.
This decline in economic indicators has led to new question marks for the US traditional leadership in the global financial system. Both the unpredictability of policy decisions and the increasing burden of debt increase uncertainties in the future stability of the dollar. On the other hand, the slimming in the dollar may have a multiplier effect for the increase in crypto currencies. If the uncertainty in the markets decreases to a certain extent, crypto currencies will go to the rise phase that it has been waiting for for a long time and turn this process even more in favor.
It is an important turning point in terms of its historical depreciation, policy uncertainties, debt dynamics, debates on the independence of the Central Bank and the effects on the global economy. This process points to new challenges that require financial decision -makers to take careful and conscious steps in the future role of the dollar and global economic balances. Investors and policy makers are expected to follow these developments closely and learn about possible risks and opportunities in exchange rates.
Responsibility Rejection: The information contained in this article does not contain investment advice. Investors should be aware that crypto currencies carry high volatility and thus risk and carry out their operations in line with their own research.
