Absolutely Nobody Is Bullish on the Dollar

Remember how the U.S. dollar was so “strong” for several years in a row? That trend has come to an end in 2025 as it seems like everybody and his uncle is bearish on what’s supposed to be the world’s reserve currency.

Now, you might not think that the ups and downs of the dollar are important to you. The dollar is absolutely relevant, however, since its relative value affects a wide range of commonly owned assets, including stocks and precious metals.

Bear in mind that when you look at a chart of the U.S. dollar index (often abbreviated as DXY or USD), it’s measured in relation to other fiat currencies around the world. In other words, the dollar might be considered “strong” for a while simply because other currencies are losing value faster than the dollar.

That may be what happened when the dollar gained relative value in recent years. As the old saying goes, the U.S. dollar was just the cleanest shirt in a hamper full of dirty shirts.

But now, the dollar is getting dumped and whether that’s good news or bad news depends on whom you’re asking. It’s not necessarily bad news that the dollar is relatively cheap since this will make the dollar more attractive as an instrument of global trade.

Courtesy: Holger Zschaepitz

That’s not much of a consolation prize for long-dollar traders in 2025 so far, however. Alarmingly, the U.S. dollar index is down to its lowest level since 2022.

Is this downtrend likely to persist throughout the second half of 2025? Famous investor Paul Tudor Jones seems to believe so. Reportedly, he predicts a 10% dollar slump during the next year.

So, what’s causing the dollar’s recent decline? Some onlookers might have expected a pullback after several years of the dollar’s relative outperformance. There may be some merit to this idea, but it can’t be as simple as a reversion to the mean.

There will usually be a catalyst, or at least an excuse, for a downtrend as severe as this. The most obvious candidate for a catalyst would be policy-related uncertainty, which would naturally put dollar bulls in a skittish mood.

Another possibility is what one commentator called a “shift away from U.S. exceptionalism.” Whether it’s true or not, some currency traders may feel that the U.S. is losing its post-World War II dominance as a global financial power – or at least, they may feel that others feel that way.

Courtesy: @BarChart

No matter how you choose to analyze it, the dollar’s decline is certainly bullish for non-inflationary assets. It’s not a mere coincidence that gold, silver, and platinum have gone on a tear during a time when the U.S. dollar’s been in decline.

Taking a big-picture perspective, investors might view the dollar’s drawdown as a green light for gold ownership, in case you needed one. At the very least, it’s yet another sign that government debt notes aren’t meant to be held forever in large quantities.

Thankfully, there are other ways to store one’s wealth besides dollars and cents. Along with hard assets, Bitcoin provides an interesting albeit volatile alternative to constantly deteriorating fiat currencies.

Finally, it’s worth observing that the dollar index was much lower in 2021 than it is currently. Therefore, there may be more bad news ahead for staunch dollar bulls and more good news ahead for investors holding superior alternatives to the dollar.