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"The once-untouchable Dollar is facing a crisis of confidence"

ended 05. March 2025

With markets globally reeling from escalating trade tensions, one economist has said “the once-untouchable Dollar is facing a crisis of confidence, with the recent imposition of tariffs not only disrupting international trade but also shaking the greenback's long-standing role as the ultimate financial sanctuary.” Another forex expert added: “The Dollar is wobbling not trashed and still a default safe haven despite dents from unpredictability.” Newspage asked market experts for their views on whether this is simply a blip or the beginning of a longer term dilemma for the Dollar. Their views will appear below until 10:30.

6 responses from the Newspage community

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Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
As global markets reel from escalating trade tensions, the once-untouchable Dollar is facing a crisis of confidence, with the recent imposition of tariffs not only disrupting international trade but also shaking the greenback's long-standing role as the ultimate financial sanctuary. The Dollar has long been considered a fortress in times of uncertainty, thanks to being deeply entrenched in the global financial system, dominating trade settlements, central bank reserves and international capital markets. However, its increasing weaponisation through financial sanctions, and growing unpredictability resulting from the White House's erratic economic moves, could see the Dollar's safe-haven appeal erode faster than many expect. For now, viable alternatives remain flawed, with the euro suffering from political fragmentation, the yuan remaining tightly controlled by Beijing, and cryptocurrencies not yet credible as reserve assets. However, this brewing turbulence may just be the beginning.
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David Belle
Founder and Trader at Fink Money
The Dollar is not facing a crisis of confidence. In recent years it has increased its standing in SWIFT where it makes up even more transaction volume than before. The Euro is trading at 1.07... perhaps we should ask whether the Euro is facing a crisis in confidence since it was trading at 1,16 just in October. No, this is merely a realignment of interest rate differentials with the market pricing lower rates in the US.
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Prem Raja
Head of Trading Floor at Currencies 4 You
The US Dollar has weakened significantly since President Trump's inauguration, with EURUSD currently trading above 1.07 and GBPUSD trading above 1.28, both the highest we have seen in some time. The uncertainty surrounding Trump's tariffs are causing investors to lose confidence in both the Dollar and US stocks with both weakening at the same time. It will be interesting to see how the Fed reacts to a softening economy and a weaker Dollar as it may mean lower rates have to come sooner rather than later, which is exactly what President Trump wants.
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Faisal Sheikh
Managing Director at Monmouth Capital
Taking a step back from short-term dollar movements, this is an ongoing story about hegemony. The US has been the world’s only superpower for the past 40 years or so. The thing about this power is that it is most powerful when not used. The moment the superpower starts to use it and abuse it, the power dissipates.
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Tony Redondo
Founder at Cosmos Currency Exchange
Trump’s tariffs, 25% on Canada and Mexico and 20% on China have sparked Dollar pressure and volatility since his election. Until his inauguration in January, the Dollar strengthened as befits the ultimate safe haven currency as the economic consequences on the countries targeted by his tariffs were priced into the market. Since 20 January, we have seen a reversal of fortunes with the Dollar giving up over 3% against both the Pound and the Euro and the Dollar Index sliding to its lowest level since November. This suggests the Dollar’s long held safe haven status, tied to US stability and 60% of global reserves, is shaky amid trade war fears, inflation risks and gold hitting $2,927/oz. Interestingly, the Dollar remains up against the Canadian Dollar, Mexican peso and Chinese Yuan. Trump’s “turbulence” nod fits his weaker-Dollar-for-exports stance, but retaliation could hurt long-term. The Dollar is wobbling not trashed and still a default safe haven despite dents from unpredictability.
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Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
The Dollar remains the world’s dominant reserve currency, but growing trade tensions and policy uncertainty are testing its resilience. While recent tariffs have unsettled markets, calling this a full-blown crisis may be premature. Historically, the Dollar has weathered volatility due to its deep liquidity and the global reliance on U.S. financial markets. However, if geopolitical risks persist and alternative currencies – such as the euro or yuan – gain traction, the Dollar’s safe-haven status could erode over time, particularly if Eurozone countries agree to debt mutualisation in the near future. For now, the dollar is wobbling rather than collapsing, but prolonged uncertainty may encourage diversification away from the greenback in global trade and investment.