According to NZZ, the fall of the dollar was one of the key events of the financial year 2025. The American currency weakened against all 15 major currencies in the world, which is linked to serious economic upheavals that occurred in the United States.
In 2025, the dollar lost its status as a "safe-haven currency," which was reclaimed by the Swiss franc. This happened against the backdrop of a sharp change in U.S. trade policy announced by President Donald Trump on April 2, when new tariffs were imposed on imports from many countries and regions.
Although the initially announced tariffs were reduced, the average tariff rate increased from 2.3% to 14%, the highest level since 1939.
The dollar significantly weakened
These changes led to the dollar's decline. The American currency, known as the "greenback" due to its color, depreciated against all 15 major currencies, especially the Swedish krona (–20%), the Mexican peso (–16%), and the Swiss franc (–14%). Against the yen, the dollar remained virtually unchanged.
The change in political course in April determined the situation in the financial markets for the entire year, and the dollar was unable to recover. According to Thomas Stucki, Chief Investment Officer of the St. Gallen Cantonal Bank, the dollar's decline was one of the most notable events of 2025, and in trade-weighted terms, the currency lost about 7% of its value.
Carsten Junius notes that 2025 was not particularly remarkable for the franc; however, the Swiss National Bank (SNB) still intervened in the currency market in dollar trading, albeit on a limited scale, according to the economist from J. Safra Sarasin bank.
Regarding the euro, he also noted that its value against the franc decreased by about 1%, which is related to the interest rate differential between the Swiss economy and the eurozone, which was about 2.6 percentage points — the highest level since the reunification of Germany.
The British pound, Chinese yuan, and Japanese yen also depreciated by 5%, 9%, and 12% respectively, while some currencies, such as the Swedish krona, demonstrated relative resilience against the franc.
Key rates were not a primary factor but still remain a significant indicator
In 2025, the monetary policy of various economic zones did not have a significant impact on exchange rates. Major themes defining the market came to the forefront, while the SNB, the U.S. Federal Reserve (Fed), and the European Central Bank (ECB) continued to lower rates.
The SNB lowered its key rate twice by 0.25 percentage points, bringing it to 0%. The ECB also reduced its rate four times by the same amount, setting it at 2%. The Fed conducted three reductions of 0.25 percentage points, establishing a target range of 3.5–3.75%.
In 2026, the SNB is expected to keep the rate unchanged. The regulator noted that there is a "high bar" for returning to negative rates, and some experts suggest that the first increase may occur in early 2027.
The situation in the eurozone is also similar. Market participants do not expect rate cuts in the next year, and ECB board member Isabel Schnabel hinted that the next step may involve raising rates.
At the same time, in the U.S., there is an expectation of further rate cuts. The market anticipates two reductions of 0.25 percentage points in April and July. Uncertainty is heightened due to the change in Fed leadership: Chairman Jerome Powell's term expires in May, and President Trump has criticized his policy as too tight. A significant reduction in rates could put additional pressure on the dollar in international trade.
The choice of a new Fed head
The future of the "greenback," according to Stucki, depends on whether Trump can strengthen control over the Fed's interest policy. An important moment will be the appointment of Powell's successor. Markets are discussing the likelihood that the new Fed leader may cut the rate at the first meeting in June, which would signal a "new era."
It will be interesting to see if Powell's successor can align the other Fed members into a unified line, or if resistance to the idea of a "weak dollar" will be more pronounced. However, as Junius notes, the growing divergence of opinions among Fed members indicates possible disagreements. For 2026, he forecasts a slight strengthening of the franc against the euro and the dollar.
Source: InoSMI
