The US dollar has been experiencing a significant depreciation since the beginning of 2025, after being considered a strong currency for over a decade. According to Goldman Sachs and other analysts, this selling trend is expected to continue and even accelerate, which could have far-reaching consequences for stock investors and the global financial world.
Reasons for the Dollar Sell-off
- Trade Policy: The announcement of aggressive tariffs by the US government under President Trump has led to uncertainties. Normally, the dollar is regarded as a safe haven during times of market turmoil, but this time that function was absent.
- Economic Concerns: There are growing worries about the resilience of the US economy. A slowdown in growth and higher inflation due to tariffs are putting pressure on the currency.
- Financial Policy: Non-US investors are showing increasing discomfort with US financial policy. The downgrade of creditworthiness by Moody’s has further shaken confidence.
- Strategic Depreciation: Advisors to the president are pushing for a deliberate weakening of the dollar to boost the export economy – another factor contributing to the current trend.
Impact on Exchange Rate
The US Dollar Index has fallen by about 7.5% since the beginning of the year. Notably, the decline was particularly marked during global market turmoil in April 2025 following new trade restrictions against numerous countries. The Euro/USD exchange rate fluctuated close to parity (around 1.00), with forecasts predicting stabilization or slight appreciation of the euro in the second half of 2025.
| Period | EUR/USD Forecast (LBBW) |
|---|---|
| June 2025 | 1.00 |
| December 2025 | 1.00 |
Consequences for Stock Investors
A weakening dollar can have various effects on stock markets:
- Export-oriented companies benefit: A weak dollar makes American products cheaper abroad and can thus increase profits.
- Import-dependent sectors suffer: Higher costs for imported goods can create margin pressure.
- International investors lose purchasing power: For foreign investors, the return on US assets decreases when converted to their home currency.
- Volatility increases: Uncertainty over exchange rates raises risks in the markets.
Long-term Perspective
Despite current weaknesses, analysts believe the US dollar will remain the most important reserve currency worldwide – for both central banks and companies. However, further declines are possible, especially if economic or political risks intensify or international investors reduce their engagement in the US.
In summary: The current trend of dollar weakness is multifaceted and, according to Goldman Sachs, is expected to continue or even intensify – with tangible impacts on international capital flows and stock markets worldwide.