The US dollar index has the worst half-year performance in 50 years! Multiple negative factors putting pressure, global central banks frantically hoarding gold in "de-dollarization" efforts.

The US dollar just experienced its weakest first half performance since the Nixon administration broke the gold standard system of the Bretton Woods Agreement. By June, the US dollar index had fallen 10.7% against other major currencies, marking the worst half-year performance since 1973 and reaching its lowest level since February 2022. Market analysis points out that multiple bearish factors are continuing to put pressure on the US dollar, and the second half of the year may face even greater challenges. Art Hogan, Chief Market Strategist at B. Riley Wealth Management, stated that the market has already fully digested negative factors such as policy volatility, debt expansion, and expectations of a rate cut by the Federal Reserve. The US fiscal situation continues to deteriorate, with both parties failing to take effective measures to curb deficit expansion, and strained relationships in military and trade areas have accumulated sufficient bearish momentum for the US dollar. Although the US dollar has been weakening since mid-January, with only a brief rebound in April due to expectations of easing Trump's tariff policies, the overall downward trend has not reversed. In terms of market impact, the depreciation of the US dollar has not significantly affected US stocks. Over 40% of revenues from S&P 500 index component stocks come from overseas markets, and a weaker US dollar objectively enhances the price competitiveness of US export products, providing important support in ongoing trade disputes. However, the weakening of the US dollar hegemony is causing deeper concerns, with US public debt nearing $30 trillion and the fiscal deficit expected to surpass $2 trillion by 2025. If global trust in the US dollar and US debt continues to decline, it may have a structural impact on risk assets such as stocks. Central banks worldwide are accelerating their purchases of gold as reserve assets. Data from the World Gold Council shows that central banks' monthly gold purchases have reached 24 tons, and the price of gold in the first half of the year has hit a new high since 1979. US bank analyst Lawson Winder believes that this reflects countries' strategic intent to reduce reliance on the US dollar through diversification of reserves, especially against the backdrop of escalating tariff policies and fiscal deficits. TS Lombard specifically stated that they will "firmly short the US dollar," believing that intervention by the Trump administration in Federal Reserve policy and a clear stance hoping for a depreciation of the US dollar further strengthens the judgment that the US dollar is overvalued. Although the Federal Reserve may start cutting rates in the second half of this year, the historical trend of the US dollar and US bond yields rising against a rate cut cycle in 2024 suggests uncertainty in current policy effects. However, there is disagreement among Wall Street institutions on the outlook for the US dollar. Macro investor points out that the recent rise in the stock market reflects investors' restored confidence in US assets, and the previous weakness of the US dollar may be due to other currencies actively appreciating and adjustments in hedge strategies. Wealth Bank emphasizes that the US dollar's core position in the global trade and financial system is difficult to replace, and its legal environment, market transparency, and liquidity advantages make the process of "de-dollarization" extremely slow, especially considering significant shortcomings in major alternative currencies. US Treasury Secretary Scott Bennett referred to the recent exchange rate fluctuations as a "normal phenomenon," but rising US bond yields still suggest lingering concerns among market participants about US assets. Hogan from B. Riley concluded that although there may be oversold rebound potential from a technical standpoint, fundamental risks such as a debt crisis and policy uncertainty continue to accumulate, making it difficult for the downward pressure on the US dollar to dissipate in the short term.