The U.S. dollar is facing its sharpest decline in years, with the DXY Dollar Index tumbling to a three-year low of 99.314 in early European trading today, as escalating U.S.-China tariffs and softer inflation data accelerate a broad-based retreat. The currency’s collapse against major peers, including a 10-year low against the Swiss franc and a three-year low against the euro, reflects mounting skepticism about America’s economic resilience amid renewed trade hostilities.
The White House’s announcement that tariffs on Chinese goods now total 145%, up from an initially reported 125%, triggered immediate retaliation from Beijing, which raised its tariffs on U.S. imports to 125% from 84%. China’s Ministry of Commerce condemned the U.S. measures as “unilateral bullying,” deepening concerns about a protracted trade war between the world’s two largest economies.
This latest tariff volley compounds existing pressures from a universal 10% U.S. import tax introduced on April 5, which analysts say has injected fresh uncertainty into global supply chains and growth forecasts.
The dollar index’s breach of the 200-week moving average, a critical support level held since 2022, suggests a potential reversal of its multi-year uptrend. Technical analysts highlight downside targets between 99-100 for the DXY, a range last tested during September 2023’s currency slump.
Historical parallels are ominous: Similar breakdowns in 2017 and 2020 preceded dollar declines of 5-7% over subsequent months.
March’s year-over-year inflation reading of 2.4%, below the 2.6% consensus, has reinforced expectations for Federal Reserve rate cuts, despite policymakers’ insistence on data dependency. Ballinger Group’s Kyle Chapman notes the report “tilts the Fed toward further cuts at the margin,” but warns that shifting economic conditions complicate traditional policy forecasting.
The euro continues its ascent, buoyed by a €500 billion fiscal stimulus package, while the yen strengthens as Japan’s central bank gradually exits ultra-loose monetary policies. Emerging market currencies face mixed fortunes, with trade-dependent nations like Canada and Australia seeing their dollars pressured by slowing growth.
Currency strategists describe the dollar’s plunge as a “barometer of ‘sell America’ sentiment,” with ING’s Francesco Pesole warning of “high vulnerability” to further declines. The breakdown below key technical levels could trigger automated selling from algorithmic traders, while tariff-related volatility threatens to disrupt corporate hedging strategies across multinational industries.
All eyes now turn to next week’s U.S. retail sales data and Federal Reserve commentary for clues on whether policymakers will attempt to stabilize the currency. However, with tariff tensions showing no signs of abatement and technical charts firmly bearish, analysts suggest the dollar’s downtrend may have entered a self-reinforcing phase.
