US dollar falls 10% as investors lose confidence amidst uncertainty

In 2025, the US dollar experienced a significant decline of around 10% against a basket of other major currencies, marking its lowest level in three years. UBS, a leading financial institution, described the dollar as 'unattractive,' indicating expectations of further depreciations due to a slowing US economy. Foreign vendors from regions like Latin America and Asia began asking US importers to settle invoices in alternative currencies such as euros and pesos, a notable shift from the traditional reliance on the dollar that has prevailed since World War II. This depreciation in the dollar's value has coincided with an increase in global gold holdings, with central banks worldwide recognizing gold as a more stable reserve asset. Nearly 95% of central banks surveyed by the World Gold Council indicated plans to augment their gold reserves within the next year. The rise in gold holdings aligns with growing doubts about the dollar's status as a safe haven currency amidst the shifting dynamics in the US economy under President Donald Trump's second term. Moreover, many economies, while facing their respective challenges, are viewed as relatively more stable compared to the uncertainty that surrounds US economic policies. President Trump's tariffs, initially anticipated to bolster the dollar, have contributed instead to investor uncertainties, prompting concerns regarding the dollar's dominance in international markets. As a result, some countries, notably Turkey, India, China, and Brazil, have increased their gold holdings and are exploring alternatives to the dollar-driven financial system. The depreciation of the dollar, coupled with rising yields sought by foreign investors for US debt, raises the likelihood of increased borrowing costs for the US government and consumers alike. Investors now face a compounding effect of uncertainty, deteriorating confidence, and challenges to the conventional view of the US dollar as a go-to currency in tumultuous times. Consequently, it has become imperative for both institutional and individual investors to reassess their exposure and consider gold and other foreign assets as hedges against potential declines in dollar value.