Global Currency Markets Shift Amid Changing US Dollar Trends
In a surprising turn, major world currencies are gaining strength against the US dollar, despite a sharp rise in American tariffs. According to Fitch Ratings, concerns over slowing US growth have overshadowed hopes for a narrower trade deficit, leading to notable changes in US dollar trends and global exchange rates.
Mixed Signals in Global FX Markets
A new report by Fitch Ratings reveals unexpected shifts in US dollar trends, with major global currencies strengthening against the greenback despite a significant rise in US tariffs. The FX Market Monitor shows that developed market currencies—excluding the Australian dollar—have appreciated by an average of 4.5% since the end of 2024.
This trend reflects growing market concerns about the negative impact of tariffs on US economic growth, which appears to have outweighed any optimism about a shrinking trade deficit.
Emerging Markets Reflect Uneven Performance
Emerging market currencies are showing more diverse movements. The Russian ruble has appreciated by nearly 30%, while the Brazilian real and Polish zloty have also gained significantly. On the other hand, the Turkish lira and Indonesian rupiah have weakened further.
Since January 2023, the yen has lost 12% against the US dollar, while the euro and Swiss franc have gained 2.7% and 7%, respectively. Meanwhile, the Turkish lira has nearly doubled in exchange rate terms against the dollar, and the Korean won and rupiah have depreciated by 15% and 7.5%.
US Dollar Still Strong in Long-Term Measures
Despite short-term weakening, the US dollar trend remains strong when viewed through its Nominal Effective Exchange Rate (NEER), which tracks the dollar’s value against a basket of trade-weighted currencies. The NEER remains near a multi-decade high after steady gains from 2015 through 2024.
Switzerland’s NEER has reached a record high, while the euro’s NEER dipped slightly from its 2024 summer peak. The UK and Japan, however, still trail their year-2000 NEER levels by 15.8% and 26.5%, respectively.
Real Effective Exchange Rates Show Long-Term Pressures
The Real Effective Exchange Rate (REER), which adjusts for relative price levels across countries, provides additional insight into long-term US dollar trends. Japan’s REER has plunged over 55% since 2000, while the UK’s has dropped 17%.
Switzerland continues to post steady REER growth, reflecting a strong and stable currency. Poland’s REER is up by about 33%, and China’s has increased 24% since 2000, despite recent dips tied to deflationary conditions.
As 2025 unfolds, currency movements continue to challenge expectations, showing that broader economic concerns—such as inflation, competitiveness, and policy—are shaping US dollar trends more than tariffs alone.