The U.S. Dollar Index Remains Under Pressure as Donald Trump's Tariffs Push Investors to Other Currencies

The DXY index was trading at $99.95 on Tuesday, down by 9.20% from its highest level this year. It has also been hovering at its lowest point since July 2023, and a death cross it formed points to more downside in the coming months.

The U.S. dollar index is set for more declines as Donald Trump’s tariffs push investors to other currencies and a key technical indicator signals further weakness.

The DXY index was trading at $99.95 on Tuesday, down by 0.20% over the past 24 hours and from its highest level this year. It has also been hovering at its lowest point since July 2023, and a death cross it formed last week could pave the way for more downside in the coming months.

U.S. dollar index could crash further

More technical indicators show that the U.S. dollar index has further downside potential. It has formed an inverse cup and shoulders pattern whose depth is about 9%. Measuring the same distance from the lower side of the cup points to further downside of about $91.

A key survey of institutional investors also shows that most of them are bearish on the currency as the trade war continues. Sixty-one percent of respondents in Bank of America’s Global Fund Manager Survey see the greenback falling in the next 12 months. This is the most bearish these fund managers have been since 2006.

These investors are concerned about Trump’s policies and their economic impact. The most urgent fear is tariffs, which analysts at Goldman Sachs expect will push the U.S. economy into a recession later this year. Many fund managers are also expecting a recession in 2023, according to the survey.

While Trump has walked back some tariffs, those on China remain at uncomfortable levels. Most Chinese goods sold to the U.S. will receive a 145% tariff, affecting goods worth hundreds of billions of dollars. On Tuesday, Beijing announced it would be blocking Boeing from further U.S. plane purchases by its airlines in retaliation.

Further, the U.S. dollar index has dropped as Congress begins to negotiate Trump’s funding bill, which includes $4.5 trillion in tax cuts and a 0% top marginal rate.

Falling US dollar could benefit Bitcoin and most altcoins

A deteriorating U.S. dollar index could benefit Bitcoin (BTC) and most altcoins for three reasons.

Firstly, most of these coins are traded in Tether (USDT), a stablecoin backed by the U.S. dollar. As such, a weakening greenback makes Bitcoin and these altcoins more affordable to foreign traders.

Secondly, the ongoing dollar weakness is likely due to concerns about the American economy and the impact of tariffs. As such, there is a likelihood that the Federal Reserve will intervene and slash interest rates. Some Fed officials, like Christopher Waller and Susan Collins, have already confirmed that the bank is prepared to act in the event of a recession.

Thirdly, Bitcoin and altcoins could benefit as the U.S. dollar index falls because they are often considered safe havens. While the crypto market has seen a significant downturn this year, the stock market is also expected to sink as tariffs take a toll on the economy.