The U.S. dollar plunged to a three-year low on Monday as fears surrounding America’s trade policies and weakening economic outlook shook investor confidence. The greenback’s continued decline comes amid fresh tariff reprisals from China, leading to broader global market adjustments, including further slumps in crude oil prices.
Dollar Index Slides as Confidence Wavers
The U.S. Dollar Index (DXY), which tracks the currency against a basket of global currencies, fell 0.7 per cent in today’s session. This marks the fifth consecutive day of losses, driven by investor worries over inconsistent economic direction and geopolitical tensions.
Analysts say the dollar has dropped over 4 per cent since the start of April, when President Trump declared ‘Liberation Day’ and escalated a fresh wave of tariffs against China.
“De-dollarisation is now a real, and frankly scary, prospect,” said Michael Brown, senior strategist at Pepperstone. “The incoherence of economic policies and the president’s frequent reversals are making markets deeply uneasy.”
Euro Gains, Pound Lags
As confidence in the dollar erodes, the euro has risen by 5 per cent, gaining strength as European Central Bank officials push it as a viable alternative global reserve currency. The British pound, meanwhile, has underperformed against other majors due to the UK’s exposure to global market fragility, although it remains up 2 per cent against the dollar over the past two weeks.
Oil Prices Slip as Markets React
Oil prices responded sharply to the dollar’s fall and trade uncertainty:
- Brent Crude dropped to $64.47, also down 0.63%
- WTI Crude fell 0.63% to $61.14 per barrel
- Murban Crude slid slightly by 0.29%, now at $66.00
- Natural Gas, however, saw a modest uptick, rising 0.18% to $3.331/MMBtu
The falling dollar typically boosts commodity prices, but oil’s decline indicates that broader macroeconomic concerns and a fragile demand outlook are dominating sentiment.
Inflation and Tariff Risks Mount
According to a recent ING analysis, President Trump’s increasing tariffs on Chinese imports could worsen inflation in the U.S., particularly as immediate alternatives for many goods remain limited. The lack of clarity and consistency in economic leadership has further unnerved investors already weary of trade wars and their consequences.
Despite efforts by the administration to reassure markets President Trump recently insisted that “the dollar will always remain the currency of choice” sentiment appears to be shifting.
“We’re witnessing early signs of a global rethink on dollar dominance,” Brown added.
Outlook
With rising fears of inflation, uncertainty over U.S. trade policies, and volatile energy markets, investors are likely to continue seeking refuge in non-dollar assets. The coming weeks could prove pivotal in shaping the long-term stability of both the dollar and global commodity markets.
