The weakening of the USD on January 4 US time has investors questioning the position of the greenback in the context of escalating trade tensions.
Normally, when the US imposes tariffs on trading partners, the USD tends to strengthen due to capital flow finding safe assets. However, President Donald Trump's latest tariffs, targeting Canada, Mexico and China, have failed to lift the greenback as expected.
After Mr. Trump's victory in the 2024 US presidential election, the USD has increased strongly thanks to expectations of a tough tariff policy. However, after only a few months, the USD's performance is going against the previous trend, raising concerns in the financial world - MarketWatch reported.
The most worrying thing is not a weakening USD, but a sign that it may be losing its "safe-haven asset" status - an important pillar of the currency in the global financial system - according to George Saravelos, Director of Global foreign exchange research at Deutsche Bank.
Other worrying signs include the shaky US relationship between the US dollar and the stock market, as both sides weaken instead of going in the opposite direction as before.
In addition, the US dollar weakened simultaneously against both high- and low-risk currencies, showing a deeper imbalance in the foreign exchange market.
"There were times when the market reaction could be ignored, but today it is not." Saravelos warned.
In addition to concerns about the greenback's position, there are also a number of other reasons that may contribute to the USD's depreciation such as capital flowing out of the US market, flowing into European and Chinese stocks.
The US exchange-traded account deficit exceeded 4% of GDP at the end of last year - a common sign before the USD hit its peak value.
The euro benefits from expectations of increased defense spending by Europe, pushing the region's bond yields higher, attracting capital flows.
An important impact of the weakening of the USD is increased inflationary pressures, especially when Mr. Trump's tariffs could push up the price of imported goods.
In the trading session on January 4, US time, the USD depreciated against the euro (0.84%), the Chinese yuan (0.06%) and the Canadian dollar (0.06%), but increased against the Spanish peso (0.42%).
The USD Index, a measure of the value of the greenback against other major currencies, fell 0.5%, hitting 106 - the lowest since December last year, according to data from Fact Set.
History has shown that when the USD weakens amid economic uncertainty and tariffs do not bring the desired results, the global financial market may face unpredictable fluctuations.
If this trend continues, not only investors but also American consumers will face the consequences of the devaluation of the USD.
In Vietnam, early in the morning of March 5, the USD exchange rate at the State Bank was announced at 24,755 VND/USD, down 3 VND.
