The decline of the US dollar is a current topic that is heavily on the minds of investors and savers in the German-speaking world. In the first months of 2025, the dollar has lost about 7.5% of its value. Here are some reasons for this decline and tips on how investors can hedge themselves:
Reasons for the Decline of the US Dollar
Economic Uncertainty: Concerns about a slowdown in US economic growth and higher inflation due to tariffs are weighing on the dollar.
Political Instability: Trade policies and the general political situation in the US contribute to uncertainties.
Global Market Turbulence: The announcement of aggressive tariffs has led to global market turbulence, putting additional pressure on the dollar.
Tips for Investors to Hedge
- Portfolio Diversification
- Currency Diversification: Investments in other currencies such as the euro or Swiss franc can help spread the risk.
- Asset Classes: Investments in stocks, bonds, and real estate in stable markets can also contribute to risk distribution.
- Gold and Other Precious Metals: Gold is traditionally considered a safe investment in uncertain times and can stabilize the portfolio.
- Index Funds and ETFs: Investing in index funds or ETFs that target stable markets or currencies offers broad diversification and minimizes risk.
- Debt Reduction and Liquidity: Reducing debt and building liquidity reserves helps respond flexibly to market fluctuations.
- Long-Term Perspective: Focusing on long-term goals can protect investors from short-term market fluctuations.
Forecasts for the EUR/USD Exchange Rate
The exchange rate could remain stable or slightly rise in the second half of 2025. In the long term, the stability of the euro could further improve due to economic and political developments.
In times of market fluctuations, it is crucial to remain flexible and to regularly review the portfolio to make adjustments that align with individual risk profiles.