Economic Uncertainty and Trade Policies Drive Dollar’s Decline
In April, the US dollar experienced its largest decline in over two years against major currencies such as the euro, Swiss franc, Japanese yen, British pound, and Swedish krona. This drop was primarily due to economic uncertainty surrounding a potential recession in the United States amidst President Donald Trump’s trade policies.
The Dollar Index and Its April Performance
The Dollar Index (DXY), managed by the Intercontinental Exchange, which measures the greenback against a basket of six reference currencies, fell 4.44% to 99.27 points in April. This marked its largest monthly decline since November 2022, when it dropped by 5%.
Appreciating and Depreciating Currencies
Among the most appreciated currencies in April were those from advanced economies and safe-haven currencies like the Swiss franc (6.57%), euro (4.67%), Japanese yen (4.61%), Czech crown (4.44%), Danish krone (4.40%), New Zealand dollar (4.39%), and the Mexican peso (4.14%). Conversely, the Argentine peso (9.15%), South African rand (1.54%), Turkish lira (1.44%), Colombian peso (1.01%), Chinese yuan (0.30%), and Indonesian rupiah (0.14%) experienced the most depreciation.
Expert Analysis and Future Outlook
Callee Davis, Senior Economist at Oxford Economics, stated that “several major currencies strengthened against the dollar in April due to growing uncertainty testing its historical safe-haven status.” Davis further noted that the focus on currency movements will remain on the short-term risks of a US recession. However, he anticipated that capital flows might return to US assets in the second half of the year, driven by a more robust fiscal policy and less dovish Federal Reserve stance, which would weaken other currencies.
Felipe Mendoza, Financial Markets Analyst at ATFX LATAM, commented that “the current scenario reflects a structurally slowing US economy, pressured by trade policies that have instead created uncertainty, investment distortions, and supply chain strain.” Mendoza warned of sustained volatility with downward pressure on risk assets if macroeconomic data continues to confirm instability in the US.
Mexican Peso Among the Strongest
The Mexican peso appreciated against the dollar in April, marking its best month in over three years. This was supported by the US government’s decision not to include Mexico in its global tariffs.
According to official data from Banco de México (Banxico), the peso closed at 19.6136 pesos per dollar, representing a 4.14% or 84.68 centavos appreciation. This resulted in the currency’s best month since December 2021, when it appreciated by 4.47%.
Gabriela Siller, Director of Analysis at Banco Base, highlighted in a report that the peso’s appreciation during the month was due to the absence of retaliatory tariffs against Mexico.
“The exclusion from tariffs sent the signal that countries within the T-MEC will receive preferential treatment from the Trump administration. This could lead to a strengthening of commercial relations between North American countries,” Siller explained.
Key Questions and Answers
- What caused the dollar’s decline in April? The economic uncertainty surrounding a potential US recession amidst President Donald Trump’s trade policies led to the dollar’s largest decline in over two years against major currencies.
- Which currencies appreciated the most in April? The Swiss franc, euro, Japanese yen, Czech crown, Danish krone, New Zealand dollar, and Mexican peso all appreciated significantly in April.
- What factors will influence currency movements in the coming months? Experts anticipate that capital flows might return to US assets in the second half of the year, driven by a more robust fiscal policy and less dovish Federal Reserve stance.
- How did the Mexican peso perform in April? The Mexican peso appreciated by 4.14% against the dollar in April, marking its best month in over three years.
- What signal did the US government’s decision to exclude Mexico from tariffs send? The exclusion of tariffs on Mexico signaled preferential treatment for T-MEC countries from the Trump administration, potentially strengthening commercial relations between North American nations.
