AFTER suffering its steepest first-half-year decline in 50 years, the US dollar managed to recover a touch in July — but not before its repute as a global safe-haven currency had taken a significant hit.

Despite a slight improvement in the US dollar index, the markets continue to discount an early recovery of the greenback.

The dollar index had initially dropped 10.8 per cent against a basket of major global currencies during the period between January and July — its lowest since 1973, when President Richard Nixon detached the dollar’s value from gold.

This time around analysts have linked the slump to President Donald Trump’s “chaotic” economic policies — tariff wars, swelling fiscal deficits and debt growth, and interference in Federal Reserve policy to force it to lower the interest rates — that have prompted global investors to sell their greenback holdings.

The depreciation of the US dollar index in 2025 is significant and reflects the broader panic in financial markets around US debt sustainability, argues Ahmed Jamal Pirzada, senior lecturer in economics at the University of Bristol. “While developed countries like the US are not expected to default in the traditional sense of the word, there are growing concerns that the government may undermine central bank independence and attempt to stabilise debt through inflation.

The recent bill making the 2017 tax cuts permanent and Trump’s statement on what the Fed [Federal Reserve] should be doing substantiate some of these concerns. The tax cuts are expected to cost $4.5 trillion........

© Dawn Business