loading . . . Has the US dollar weakened? What does it mean for a currency to be “strong”? The US dollar is considered stronger than another currency if one or both statements below are true:
1. The prices of goods and services are cheaper in dollars than in that other currency.
2. It costs more than one unit of that other currency to purchase one US dollar.
Analysts and politicians have described some current policies of the federal government as an attempt to weaken the US dollar because they consider it to be too strong for a healthy economy.
To see whether the US dollar has been weakened, we plot its exchange rate with the euro, Japanese yen, and Swiss franc. If the US dollar has indeed grown weaker since January 2025, we’d expect a decrease in the cost of a US dollar in these three relatively stable currencies.
Our first FRED graph, above, does show a downward trend in 2025, suggesting a weakening of the dollar against these currencies. The yen and franc are widely considered “safe haven” currencies. Does the US dollar also exhibit this behavior against the currencies of emerging economies?
Our second FRED graph, below, plots the dollar’s exchange rates with the currencies of the founding members of BRICS: Brazil, Russia, India, China, and South Africa. _These_ exchange rate trends vary: Since January 2025, the dollar has depreciated more significantly against the Russian ruble than against any other currency in either graph. But the dollar has been stable in relation to the Indian rupee and Chinese yuan.
Finally, for a balanced view of the dollar’s value, we plot the nominal broad US dollar index. This index is a weighted average of the US dollar’s foreign exchange value against major US trading partners, including the euro area, all founding BRICS members except South Africa, and other major US trading partners such as Canada and Mexico. Since January 20, 2025, we see a clear depreciation in the US dollar across this basket of foreign currencies.
**The takeaway** : Recent exchange rates with stable currencies (e.g., the euro, yen, and Swiss franc) suggest a _general_ weakening in the US dollar, which is consistent with the current federal administration’s stated preferences. But this depreciation is not uniform across all nations.
**How these graphs were created** : First graph: Search FRED for and select “Currency Conversions: US Dollar Exchange Rate: Average of Daily Rates: National Currency: USD for Euro Area (19 Countries).” From the “Edit Graph” panel, under “Edit Lines” tab, select Line 1 and change the units from euros to “Index” and enter the date 2025-01-01 to equal 100 in your custom index. Use the “Add Line” tab to search for, select, and adjust the same series for Switzerland and Japan. To create the vertical line in January 2025, use “Add Line”/”Create Line”/“Create user-defined line”: Set the start and end dates to 2025-01-01 and set the start and end values to 80 and 105, respectively. Use the “Format” tab to customize line colors. Second graph: Repeat the same steps for Brazil, Russia, India, China, and South Africa. Third graph: Graph “Nominal Broad U.S. Dollar Index.” From the “Edit Graph” panel, under “Edit Lines,” change the units to “Index (Scales value to 100 for chosen date)” and choose 2025-01-20. To create the vertical line, set the start and end dates to 2025-01-20 and set the start and end values to 90 and 102.
Suggested by Paulina Restrepo-EchavarrĂa and Mickenzie Bass. https://fredblog.stlouisfed.org/2025/11/has-the-us-dollar-weakened/
