UBS On-Air: Market Moves Across the Pond: What a weaker greenback means for global investors
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Aug 4, 2025 
Dominic Schnider, Head of CIO Global FX & Commodity at UBS, and Constantin Bolz, CIO FX Strategist, dive into the recent sharp decline of the US dollar. They discuss its impact on global investors' strategies and the implications for portfolio diversification. The duo highlights factors such as tariffs and fiscal deficits affecting currency values. They emphasize the rise of alternative currencies like the euro and the potential investments in European markets. It's a timely conversation urging investors to reconsider their currency exposures.
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Drivers of Dollar Weakness
- The dollar's weakness in 2025 stems from its previously high valuation and downgrade in U.S. growth expectations.
- Fiscal deficits, tariff uncertainties, and Fed independence concerns further pressured the dollar, especially versus European currencies.
Trade War Impact on Dollar
- The U.S. trade war, especially taking on many countries simultaneously, weakened the dollar by increasing recession risks.
- While recent tariff deals have eased tensions slightly, lasting economic and reputational damage to the dollar remains.
Fed Independence and Dollar Risks
- Undermining Federal Reserve independence threatens confidence in the dollar's stability and safe-haven status.
- Rising U.S. debt servicing costs on large deficits may force the Fed to assist fiscally, weakening the dollar structurally or cyclically.