The US dollar is having a difficult time in the markets as the DXY index is seeing a drastic dip. The DXY index, which tracks the performance of the US dollar is down close to 4% year-to-date. The USD entered 2025 trading at the 109.30 mark but is now hovering around the 104.25 range. The currency had also fallen to the 103.2 level last month signaling that it has entered the bearish territory.

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In addition, eight out of nine leading currencies have outperformed the US dollar in 2025. Only the Canadian dollar briefly declined by 0.1% YTD against the greenback. Read here to know which leading currencies outpaced the USD this year and are performing better than expectations. The forex markets have seen a considerable change after Trump took office and the move is not benefiting the USD. The greenback stands more to lose than other currencies as the top spot is now being threatened.

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Currency: Why Is the US Dollar Declining?

Several macroeconomic factors are affecting the US dollar’s prospects in 2025. It includes the probability of an upcoming recession in the homeland to tariffs from the White House and reciprocal tariffs. Leading global investment bank Goldman Sachs raised the recession probability from 20% to 35% this year. The instability in trade and rising costs for consumers is what’s making the US dollar decline in the charts.

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However, Trump claims the decline is only temporary and the economy will flourish once the tariffs kick in. Market insiders believe the opposite as trade imbalance will only lead to lesser consumerism leading to a decline in revenues. The overall economy remains on a slippery slope and a wrong policy can send the markets tumbling. The US dollar remains at the edge of the line as weaker sentiments could pull the DXY index further down.