Experts Warn Weakening Dollar Signals 'Crisis of Confidence' in Backbone of Global Markets

Colin Laidley

Tue, Apr 15, 2025, 3:00 AM 4 min read

• The U.S. Dollar Index is on track to have its worst two-month stretch since 2002.

• Former Treasury Secretary Janet Yellen warned on Monday the simultaneous sell-off of dollars and Treasury bonds could signal crumbling faith in the stability of U.S. assets that have long been the backbone of global finance.

• MUFG analysts in a note on Monday expressed skepticism that the Trump administration would take any steps in the near term to shore up confidence in the dollar.

The U.S. dollar is on track to have its worst month in years, a development that has alarmed some experts worried about crumbling faith in U.S. financial stability.

The U.S. Dollar Index has declined more than 4.3% since the start of the month. If the index held steady for the remainder of April, it would be the U.S. dollar’s worst month since November 2022 and its ninth-worst since 2000. With March’s 3.2% decline, the dollar is on track to have its worst two-month stretch since 2002.

The dollar’s decline has puzzled market watchers, including former Treasury Secretary Janet Yellen, who called the recent moves in the world's reserve currency part of “a very unusual pattern” during an interview with CNBC on Monday.

Yellen explained that investors tend to gravitate to safe havens like U.S. Treasury securities during times of market uncertainty. Increased demand for Treasurys, she said, usually boosts the dollar since Treasury bonds can only be traded in dollars. But recently Treasury yields have skyrocketed and the dollar has declined.

“And what that suggests is that investors are beginning to shun dollar-based assets, and [are] calling into question the safety of what is the bedrock of the global financial system, namely U.S. Treasurys,” said Yellen.

Experts have several theories about why investors aren’t flocking to Treasurys amid all the market turmoil. Some have speculated it’s because tariffs threaten to fuel U.S. inflation, which would force the Federal Reserve to keep interest rates elevated. Another possible reason is reduced demand from international investors and other countries spooked by the Trump administration’s unpredictability and hostility to the global order.

Some have speculated that China, one of the largest foreign owners of Treasury debt, is dumping its bonds to retaliate against Trump. There’s very little data available to support that theory, according to a research note from MUFG published Monday. Though they note China has reduced its Treasury holdings by about 25% since the end of 2021, “possibly anticipating what lies ahead.” China has also been a major advocate for global de-dollarization.