Why Is the U.S. Dollar’s Value Dropping? Our Analysis for 2025

Hearing that the U.S. dollar is dropping in value can be stressful, especially with sensational news coverage fueling public uncertainty. While the dollar has weakened since 2024, it remains one of the world’s strongest currencies, and economists agree it’s unlikely to collapse entirely.

Below, we’ll explain why the value of the U.S. dollar has weakened, what causes these changes, and the potential consequences. We’ll also share the history of other times the dollar has dropped in value and tips to help you protect yourself and your assets amid future market fluctuations.

Table of Contents

1. Is the U.S. dollar weakening?
2. What causes weakness?
3. Consequences
4. How often does the dollar drop? 
5. Other global currencies
6. Will the dollar get stronger?
   1. Will it keep losing value?
7. Should I be worried?
8. How to protect assets and investments

Is the U.S. dollar weakening?

Yes. The U.S. dollar has been weakening, particularly since 2024, which has led to recent headlines. According to the U.S. Dollar Index (DXY), the dollar declined by around 10.5% in the first half of 2025. However, currency values constantly shift, and economists emphasize viewing these changes within broader long-term trends rather than reacting only to short-term fluctuations.

Here’s the value of DXY over the last year:

The DXY measures the dollar’s value against other major foreign currencies, including the Canadian dollar, British pound, Swedish króna, Swiss franc, Japanese yen, and the euro. When the index goes down, it means the dollar’s value has decreased compared to these other currencies.

What causes the U.S. dollar to weaken?

Numerous factors working in tandem cause the U.S. dollar to drop in value. A report from Statista explained that a mixture of economic changes, current interest rates, and the global performance of other currencies are behind the current weakening of the dollar.

• Economic uncertainty: In 2025, trade politics and changing tariff policies have created significant economic uncertainty. Many investors, including international businesses, choose to put their money elsewhere because they consider the U.S. economy riskier at this time.
• Geopolitics: Because the U.S. measures the dollar’s value against other top global currencies, sometimes the value of the U.S. dollar drops because other international currencies are doing well.
• Federal Reserve interest rates: Higher interest rates attract international investors seeking better returns, increasing demand for U.S. dollars. However, future Fed policy remains uncertain.

What are the consequences of the U.S. dollar losing value?

The dollar losing value creates inevitable consequences. Some are negative and make life more expensive for Americans, while others might be considered positives for some business owners who rely on exports to turn a profit. Here are several examples:

• Increased travel costs: An article from Northeastern University explained that a weaker U.S. dollar often means international travel will be more expensive. So those who have plans to travel to Europe, for example, will likely find that their trip costs more.
• More expensive imported goods may become more expensive: BBC reports that imported goods to the U.S. will be more expensive, but exported goods will become more affordable. Cheaper exports can benefit American businesses that sell abroad, such as manufacturers, farmers, and technology companies.
• Potential for more inflation: Because it will take more U.S. dollars to purchase the same items, many businesses will pass on the higher costs to customers, which can contribute to higher inflation. This could hurt Americans trying to afford everyday essentials, like groceries and gas.
• More investor uncertainty: Economic policies have already caused stock market dips in 2025. Market downturns and drops in investment accounts cause many Americans to worry more about their futures.

How often does the dollar drop? 

The value of the dollar, like all currencies, rises and falls over time. Exchange rates change daily, but some declines stand out historically.

Historic dollar declines

Statista’s chart below shows the value of the dollar from 1973 to 2025:

Numerous years have seen the dollar experience historic drops. The financial crises of 2008 and 2009 were a significant low point. The dollar also dropped in 2011, 2018, and during the COVID-19 pandemic in 2019 and 2020.

The current value of the dollar is higher than it was during all those historic declines, which might ease many people’s worries.

When was the dollar the strongest?

The dollar reached peak strength in 1985, 2002, and 2022, driven by coordinated international interventions (1985), strong U.S. economic growth and Fed policy (2002), and post-pandemic rate hikes (2022).

What’s happening to other global currencies?

According to Fitch Ratings, which assigns credit ratings to various financial institutions, companies, and countries, several currencies are weakening while others are strengthening. 

What other currencies are weakening?

According to Fitch Ratings, these currencies weakened:

• Japanese yen: Depreciated 12% between January 2023 and April 2025.
• Turkish lira: In April 2025, it took twice as many lira to equal one U.S. dollar as in early 2023.
• Indonesian rupiah: Depreciated 7.5% from January 2023 to April 2025.
• Australian dollar: The only other major currency to drop in value in 2025.

What other currencies are getting stronger while the dollar weakens?

These currencies strengthened in 2025 despite the U.S. dollar weakening:

• Swiss franc: Appreciated 7% between January 2023 and April 2025.
• Euro: The value was up 2.7% from January 2023 to April 2025.
• Russian rouble: Appreciated 30% in 2025.
• Chinese yuan: Historically strengthened significantly before 2014 but has depreciated in recent years.

Will the dollar get stronger?

It’s normal for the U.S. dollar to fluctuate. Future economic policies will influence whether it strengthens in the coming months or years. For example, in July 2025, its value rose after a positive jobs report, as job growth often boosts confidence in the U.S. economy. However, factors like interest rate decisions, tariff changes, and global political tensions will continue to influence its value over time.

Will it keep losing value?

No one knows for certain what the future holds for the U.S. dollar, but many economists expect further weakening this year. Ultimately, while tariffs and spending bills may affect the economy, it’s wise to track the dollar’s value regularly using the U.S. Dollar Index and focus on long-term trends rather than short-term headlines.

Should I be worried about the U.S. dollar weakening?

A weakened dollar could exacerbate inflation and increase the prices of imports. As we mentioned, Americans who want to travel abroad and exchange money for foreign currency won’t get as much cash as they might have in previous years.

However, even though the U.S. dollar is weaker, it’s unlikely it will collapse completely. The U.S. dollar remains one of the strongest currencies globally, providing reassurance for those worried about a complete currency collapse.

How to protect assets and investments when the U.S. dollar weakens

Here are a few actions you can take to protect your assets now and in the future as the U.S. dollar fluctuates. Remember, it’s normal for the dollar to rise and fall, and its value is higher right now than it has been at many other times in history.

Diversify your investments

Having a mixture of investments, such as stocks, bonds, mutual funds, international funds, real estate, and commodities like gold, can help insulate your portfolio during market downturns.

If you’re considering adding gold to your portfolio, American Hartford Gold is our top-rated gold dealer and best overall gold IRA provider. It offers a wide range of precious metals, competitive pricing, and strong customer support to help you protect your assets against market volatility.

Reduce high-interest debt

High-interest debt, such as credit card debt, compounds fast. If the dollar weakens, paying off debt can become more challenging over time. If you have high-interest debt, paying it off or consolidating it into a fixed-rate loan, such as a personal loan, can help.

Maintain a cash reserve

Though it might seem counterintuitive to keep a cash reserve if the dollar weakens, an emergency fund can help supplement your income if inflation increases. It can also help you avoid credit card debt if an unexpected expense arises.

Stay informed

It’s wise to stay informed and follow global headlines, all while keeping in mind that sometimes the news is sensationalized for views. Look for stories from credible sources backed by data. The more accurate information you have, the better able you’ll be to make decisions about your financial future.