The US dollar has dropped more than 10 per cent in the first half of 2025, marking its sharpest six-month decline since 1973, and sparking fresh warnings from economists and currency experts about the potential for heightened financial market volatility.Despite a full rebound in US stock markets, with the S&P 500 and Nasdaq recently hitting record highs, the falling dollar and surging long-term treasury yields point to growing investor concerns over the stability of US financial assets. Analysts link the selloff to US President Donald Trump’s unpredictable economic policies and weakening confidence in the federal reserve."It's US exceptionalism basically falling by the wayside and the rest of the world playing catch-up," said Erik Nelson, macro strategist at Wells Fargo, predicting continued dollar depreciation as other global economies catch up, according to AFP.The ICE US dollar index, which measures the greenback against a basket of major currencies, fell 10.7 per cent through June, its worst start to a year in over five decades.The euro has been a major beneficiary, gaining over 13 per cent this year thanks to Germany’s fiscal spending and ECB rate cuts.

Economists say global investors are rethinking their reliance on the dollar as a safe haven currency. Joseph Brusuelas, chief economist at RSM US, called the current retreat the start of a “multi-year unwinding” of the dollar’s 14-year bull run.

Harvard economist Kenneth Rogoff, author of Our Dollar Your Problem, pointed to a growing trend among central banks in China and other nations to diversify away from the dollar, a trend accelerated by Trump's policies.“I think we'll see a period of a lot of financial volatility, largely centered around the chaos in the United States," Rogoff said, citing threats to central bank independence and the rise of populism.

The Trump administration has added to the volatility with conflicting signals on monetary and trade policy. Trump has publicly attacked fed chair Jerome Powell, demanding interest rates "at least two to three points lower," and called Powell "a stupid person."While treasury secretary Scott Bessent denied aiming for a weak dollar, analysts say the trend fits with the administration’s manufacturing and onshoring strategy."Lower interest rates and a weaker dollar would enable the US to strengthen its economic self-sufficiency and increase onshoring," reported AFP quoting Jason Schenker of Prestige Economics.In April, Trump reversed new tariffs announced just a week earlier after a surge in Treasury yields caused a stock market dip. He later said he had no plans to remove Powell, walking back earlier threats.So far, US equities remain strong, seemingly unaffected by the dollar’s drop. But some experts warn the situation could shift quickly.