US dollar slides as fiscal strains, policy uncertainty mount

The US dollar is weakening sharply against major global currencies, reflecting mounting concerns about America’s fiscal trajectory, monetary policy outlook, and shifting role in the world economy, according to reporting by Axios.

The dollar’s decline—underway for more than a year and accelerating in recent weeks—comes amid massive US fiscal deficits, expectations of easier monetary policy despite elevated inflation, and growing uncertainty over US trade and foreign policy. Together, these factors are reshaping global perceptions of the dollar’s long-standing status as the world’s primary safe-haven currency.

Despite robust US economic growth and continued strength in equity markets, fueled in part by the artificial intelligence boom, currency markets are telling a different story. While expectations of further Federal Reserve rate cuts have helped stabilise US Treasury prices, the dollar has continued to slide.

According to Axios, the US dollar index—which measures the currency against six major peers—has fallen 3.2% since January 16 and is down 10.4% since Inauguration Day one year ago. Such moves are significant for a currency that underpins global trade and financial flows.

Recent remarks from President Donald Trump have added to market momentum. Asked on January 27  whether he was concerned about the dollar’s decline, Trump responded: “No, I think it’s great. I think the value of the dollar — look at the business we’re doing. The dollar’s doing great.”

The following day, Treasury Secretary Scott Bessent sought to clarify the administration’s position.

“The U.S. always has a strong dollar policy,” Bessent said on CNBC, adding, “but that means setting the right fundamentals.”

The dollar index edged slightly higher after his remarks.

Bessent also denied that the Treasury Department is intervening in foreign exchange markets to support the Japanese yen—something traders have speculated about in recent days. Any such action to strengthen the yen would, by definition, imply a weaker U.S. dollar.

Axios notes that the Trump administration’s stance on the dollar remains ambiguous. On one hand, it promotes a capital investment boom through tax cuts and deregulation, and has pressed foreign governments to dramatically increase investment in the United States—factors that would typically support a stronger currency.

On the other hand, the administration has pushed to reduce the trade deficit, boost domestic manufacturing, and repeatedly called on the Federal Reserve to lower interest rates, even as federal deficits continue to widen. These forces tend to point toward a weaker dollar.

Compounding matters, volatile trade and foreign policy—including shifting tariff regimes on allies and controversial territorial demands—has fueled a sense among global investors that the dollar is no longer the unquestioned “port in the storm” it once was.

That perception is reflected in the performance of alternative safe-haven assets. Since mid-January, the Swiss franc has risen 4.4%, while gold has climbed 15%, according to figures cited by Axios.

“Aggressive fiscal expansion, unpredictable trade policy and sudden political interventions create uncertainty over growth, inflation and capital flows,” deVere Group CEO Nigel Green wrote in a note. “Currencies price risk immediately, and, as we're seeing in real-time, the dollar is paying the price."

By Sabina Mammadli