The dollar continues to rise, supported by US growth and its safe-haven appeal. Higher rates and global uncertainty further strengthen its position, even as equities face challenges.
The US Dollar Index (DXY), which tracks the dollar’s value against other major currencies, has experienced significant appreciation over the last 20 years. Over time, the dollar has been viewed as both a safe haven and an avenue to access growth potential in the US. Recently, higher rates and the Trump administration have highlighted the dollar’s role as a tool for growth.
Over the last few years we have seen the dollar spike and remain at elevated levels. This is due to superior US growth opportunities but also due to its protective qualities. In 2022, the index hit its highest level since 2002, while global equities had one of its worst-performing years in recent memory with the MSCI All Country World Index returning -18% in USD. Despite global weakness, the US dollar appreciated in times of economic and geopolitical uncertainty exhibiting its safe haven characteristics.
President Trump has made it clear he favors a weaker US dollar and lower interest rates, but his policies seem to favor stickier inflation, higher growth, and a stronger US dollar overall. Unless we see growth soften, it is hard to see anything beyond periodic, temporary corrections in the dollar. To learn more about US dollar strength under the new administration please check out our latest insight Don’t Sell the US Dollar Yet.
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