The dollar paradox
The U.S. dollar has remained resilient despite fiscal deficits and political uncertainty. Supported by high real yields and relative growth strength, the DXY index hovered near 105 through 2025—well above its pre-pandemic average. This strong dollar has mixed implications: it curbs imported inflation but pressures exports and emerging markets.
Data table: U.S. dollar and trade indicators
| Metric | 2022 | 2023 | 2025 (YTD) |
|---|---|---|---|
| DXY Index (avg.) | 101 | 104 | 105 |
| U.S. Exports Growth (%) | 7.8 | 3.1 | 2.4 |
| Trade Balance ($B) | -947 | -903 | -870 |
| Emerging Market Currency Index | – | -8% | -6% |
Sources: IMF, BEA, Bloomberg.
Winners and losers
While importers and U.S. consumers benefit from cheaper foreign goods, exporters face competitiveness challenges. Sectors like agriculture and manufacturing are feeling the pinch. Meanwhile, emerging markets with dollar-denominated debt face higher refinancing costs.
The geopolitics of currency strength
Dollar dominance remains unchallenged, but alternatives such as the euro and yuan are slowly gaining share in trade settlement. A multipolar currency order could emerge if U.S. fiscal deficits continue to widen.
Strategic insight
For global businesses, hedging dollar exposure and diversifying sourcing locations are now strategic imperatives. The dollar’s staying power underscores the need for resilience planning—balancing domestic growth with exposure to global volatility.