The U.S. Dollar Index extended its decline on Thursday, dropping below 97.8—its lowest level since 2022—as a combination of trade uncertainty, geopolitical risks, and soft economic data weighed heavily on market sentiment.
Renewed Trade Tensions Trigger Investor Concerns
President Donald Trump announced plans to send formal letters to major U.S. trading partners within the next one to two weeks. These letters will outline unilateral tariff measures aimed at pressuring countries into new trade agreements. This development comes ahead of the expiration of the 90-day pause on reciprocal tariffs next month, fueling concerns about a potential escalation in global trade tensions.
Geopolitical Risks Add to Dollar Weakness
Market anxiety intensified further after Iran threatened to strike U.S. military bases if ongoing nuclear negotiations collapse. These heightened geopolitical risks have triggered a shift toward safe-haven currencies such as the Japanese yen and Swiss franc, contributing to additional downward pressure on the greenback.
Weak U.S. Inflation Data Fuels Rate Cut Expectations
Adding to the dollar’s slide, U.S. inflation data released Wednesday came in below expectations, reinforcing the view that the Federal Reserve may cut interest rates twice before the end of the year. Softer inflation reduces the urgency for tightening monetary policy, weakening demand for U.S. assets and the dollar itself.
Biggest Losses Against Euro, Franc, and Yen
The dollar posted its sharpest declines against the:
- Euro (EUR)
- Swiss Franc (CHF)
- Japanese Yen (JPY)
These currencies benefited from both relative economic strength and their safe-haven status amid global uncertainty.

Bottom Line: With trade threats looming, geopolitical instability rising, and inflation cooling, the dollar may remain under pressure in the coming weeks. Investors are likely to stay cautious and watch for signals from both the Federal Reserve and global policymakers.

Tags: Dollar Index, USD, Forex, Geopolitics, Federal Reserve, Inflation, Tariffs, Trump, Iran, Safe Haven, Currency Market, Interest Rates