For decades, the U.S. dollar has been the world’s go-to safe haven during market volatility. But now, as stocks slide and global uncertainty rises, something unusual is happening: the dollar is falling, too.
According to Bloomberg, the dollar has dropped against nearly every major global currency this year, marking its worst start since 2017. The Bloomberg Dollar Index is down nearly 3% year-to-date, while Gold (XAUUSD), a traditional alternative to the dollar, has surged to a record high, breaking $3,000 an ounce.
John Sidawi, a bond fund manager at Federated Hermes, called the move “very telling.” He told Bloomberg, “The dollar, in an environment where it should be acting like a safe haven, is not.”
A Shift in Market Behavior
This behavior change is linked to President Donald Trump’s economic policies. Just two months in, Trump has slapped new tariffs on foreign goods, including imported cars, and is preparing for even broader tariffs to be announced on April 2 — a day he’s calling “Liberation Day.” Additionally, Trump’s own inconsistency regarding the tariff policy implemented hasn’t helped the situation.
Michael Brown, a senior research strategist at Pepperstone, a major currency broker, said the dollar no longer looks like the stable choice it once was. “An increasing number of clients are asking, ‘Where should I be looking at as opposed to just switching on the autopilot and hiding in the dollar?’” he told Bloomberg.
What This Means for Your Portfolio
The recent drop hasn’t erased the dollar’s strength built over recent years, and it still holds a central place in global trade and central bank reserves. But investors are watching closely.
As the dollar weakens, gold has soared, a sign many are moving their money to safer ground. European stocks are also rising, with Germany planning a defense spending boost that could support further growth. The result: more investors are shifting capital overseas.
Meanwhile, the S&P 500 Index (SPY) (SPX), which had enjoyed strong gains in recent years, has now been down 9% since mid-February. High valuations in tech stocks, inflation worries, and political uncertainty contribute to the selloff.
Thierry Wizman, a macro strategist at Macquarie Group, warned that doubts about the U.S.’s economic direction could cause “dislocations that would force the U.S. stock market lower and the dollar as well.”
A Time to Stay Alert
Some experts say the dollar’s dominance won’t vanish overnight, a stance well represented by Harvard University professor and former World Bank chief economist Carmen Reinhart, who noted, “The dollar did not overtake the British pound as a reserve currency overnight.” Still, others warn that the ” de-dollarisation ” trend could accelerate.
As Bloomberg reported, Deutsche Bank’s global head of FX strategy, George Saravelos, recently said the chance of the dollar losing its safe-haven status “needs to be acknowledged as a possibility.”
For retail investors, this is a good time to review their exposure to the dollar and U.S. markets and consider how global shifts could affect their portfolios in the months ahead.
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