The U.S. Dollar Is in Decline, but It's Not All Doom-And-Gloom

it's important to understand how a currency's strength affects the people of a given country.

The U.S. Dollar had its worst first half of the year since 1973. The USD declined about 10% in the first half of 2025, and this could have far-reaching effects on all of us. That said, it doesn’t automatically spell gloom, and I wouldn’t be too terrified yet.

First, here’s why a country’s currency’s strength matters: Other countries’ currencies have gained in strength compared to the dollar. As Madison Mills from Axios phrases it, other countries may be “moving away from dollar-dominated assets.”

It can be hard to understand why the value of the dollar matters, especially for people who don’t leave America often. But the long story short is that the dollar’s value demonstrates the prices of our own assets, and it helps determine the health of our economy. In the Axios piece that I linked to by Mills, I found it fascinating that the former PIMCO CEO and a financial professor at Queens College in Cambridge, England said that he checks the dollar every morning when he wakes up. So if a renowned professor outside America thinks that this is important, then we Americans probably should, too.

A lot of this has to do with uncertainty about fiscal policy in America. There’s just no way around the political aspect of this, as the uncertainty that other countries see for our policies has an almost automatic effect here. The U.S. has always been seen as a safe place to invest because of our financial and economic stability, but that safety declines when stability declines.

And here’s one thing that I’m surprised Mills didn’t bring up: Tourism decline in America. While it may not have a significant impact on every aspect of the economy, it’s a great time for non-Americans to come visit America when the dollar is low. And largely due to political uncertainty, that’s declined, as the World Travel and Tourism Council pointed out here. These effects can compound, as tourism is a great way for countries or cities to get economic benefits. And to put it bluntly, these benefits come at the financial expense of other countries’ citizens than your own.

Now, we need to be fair and tell the whole story, and that’s where some optimism comes in. The dollar was on a run for the past three years that saw a ton of strength in it. (That partly explains why we did much better coming out of the pandemic than other countries.) So it’s only fair to assume that there will be some pullback.

And as Mills points out, there’s still no real alternative to the dollar and America’s financial and economic strength as a whole. We’re still the leader with the most sophisticated economy and markets, and that’s not changing anytime soon. If it does change, it’ll take a while.

Could it ever change? Yes. And that’s why this story bears watching. There’s no reason to panic now, though. The dollar’s value had some room to come back to earth, and it did. But in the coming 6-12 months, let’s see where it goes. It affects all of us, whether or not we’re thinking about it.