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Dollar slumps as US faces loss of confidence – impact on Indian rupee, other currencies

2 min read

Impact of Trade Policies on the American Dollar

US President Donald Trump's trade policies have led to a significant decline in the value of the American Dollar. This is largely due to decreased confidence in the US economy, prompting a shift from the dollar to other safe haven currencies such as the Swiss franc, Japanese yen, euro, and gold.

Currency and Asset Movements

  • Investors are moving away from US assets, causing a slump in the dollar.
  • Gold reached a new all-time high, and the Swiss franc hit a fresh decade high.
  • There was a significant selloff in Wall Street stocks following Trump's tariff pause.

Impact on Indian Rupee

The Indian Rupee opened weak but is expected to strengthen if the dollar's decline and a reduction in oil prices continue. The dollar index, which measures the dollar against a basket of currencies, fell over 3%, dropping below 100 for the first time since July 2023.

Bond Market Dynamics

  • Trump's tariff policies led to a selloff in American bonds as confidence waned.
  • Foreign investors, including from Japan and China, offloaded US government debt.

Relation Between Bond Yields and Currency Value

  • Higher bond yields typically attract foreign investment, boosting currency value.
  • Large-scale bond selloffs make it costly for the US to finance its budget, affecting social security and other programs.

International Concerns

For the first time in 24 months, there is a noticeable demand for higher premiums on junk-rated American debt compared to European equivalents, indicating fears about the US economy's slowdown.


  • Tags :
  • trade war
  • bond yield
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