The U.S. Dollar Index is currently facing its worst two-month decline since 2002, having dropped over 4.3% in April 2025 alone.

This decline has been exacerbated by recent market turbulence, with the dollar reaching its lowest point in three years against major currencies following Donald Trump's reversal on reciprocal tariffs.

In just one week, the dollar has fallen nearly 3% on average, causing the euro to rise significantly, trading at 1.13 dollars, up from 1.08 earlier this month.

The turmoil is centered around the enormous $29 trillion U.S. debt market, which is showing alarming signals and has influenced Trump's decision to pause tariffs.

Financial experts, including Laurence Summers, have warned of a growing crisis of confidence in U.S. debt and the dollar, highlighting persistent financial risks.

Former Treasury Secretary Janet Yellen cautioned that the simultaneous sell-off of dollars and Treasury bonds indicates a loss of confidence in U.S. financial stability, which has historically supported global markets.

Experts warn that while Treasuries typically offer liquidity and stability, their credibility may be weakening due to rising inflation and budgetary concerns.

Amid these financial uncertainties, gold prices have surged to a record high of $3,245 per ounce, indicating a flight to safety among investors.

Market analysts from MUFG express skepticism that the Trump administration will implement effective measures to restore confidence in the dollar in the near term.

Without significant policy changes and a commitment to reducing the deficit, analysts predict that investor sentiment is unlikely to improve, keeping the dollar under pressure.

There are concerns that foreign investors may be exiting the U.S. debt market, with the latest data on foreign ownership being from January.

Speculation surrounds China potentially reducing its Treasury holdings in response to U.S. trade policies, although concrete data supporting this is limited.