Dollar dynamics under the terms of American presidents

Since Republican Donald Trump was inaugurated as US President in January 2025, the US dollar has been very sensitive to the US administration's announcements regarding tariffs, given its role in global trade and confidence in the economy.

The dollar appreciated after tariff threats against China, Mexico and Canada, but later fell once the tariffs were suspended (in January), according to an analysis by visualcapitalist.com that shows the evolution of the Dollar Index under the mandate of each US president from the 1960s to the present, based on TradingView data.

According to it, while trade policy remains uncertain, some analysts predict that the dollar will strengthen in the next few years, but then lose ground amid the growth of the US debt, accelerated by Trump's promised tax cuts.

The Dollar Index measures the value of the dollar against six other major currencies - the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. When the US economy is strong relative to global economies, the value of the index increases, given the greater demand for the dollar, considered a safe-haven asset.

The aforementioned analysis shows the following evolution: during Richard Nixon's term (1969-1974), the Dollar Index rose from 119.89 to 101.3 points (beginning and end of term level); during Gerald Ford's term (1974 - 1977), from 102.3 to 105.5 points; during Jimmy Carter's presidency (1977 - 1981), from 106 to 92.1 points; during Ronald Reagan's terms (1981 - 1989), from 95.2 to 95.1; under the presidency of George H. W. Bush (1989 - 1993), from 96.2 to 91.5; under the Bill Clinton era (1993 - 2001), from 92.5 to 112.5; under the George W. Bush administration (2001-2009), from 112.1 to 84.2; under Barack Obama's administration (2009 - 2017), from 85.6 to 100.7; under the presidency of Donald Trump (2017-2021), from 100.5 to 90.2; under the Joe Biden administration (2021-2024), from 90.6 to 109.4.

It is worth noting that in 1985, during the presidency of Ronald Reagan, the Dollar Index rose to record levels, when the monetary policy interest rate had reached 18%. High interest rates made holding US dollars more attractive, and America's economic strength played a role in stimulating investor sentiment, the cited source notes.

At the time, the significant appreciation of the dollar generated a substantial trade deficit, as American goods became increasingly expensive, while imports were cheap. To limit the rise of the dollar, world leaders concluded an agreement in 1985, called the Plaza Accord, which contributed to the dollar's decline by 40% over the next two years.

In contrast, the dollar reached historical lows in 2008, during the global financial crisis, under the mandate of George W. Bush. In late 2008, the Federal Reserve (the central bank, the Fed) cut interest rates to near zero amid deteriorating labor market conditions. Concerns about a slow economic recovery have led investors to turn to gold and other higher-yielding currencies.

• Will the Dollar Index Continue to Rise?

In 2024, the dollar's upward trend was underscored by the strength of the U.S. economy, while Europe and China have seen sluggish GDP growth. This trend could continue if Trump implements tariffs, for several reasons. First, tariffs could fuel inflation, prompting the Federal Reserve to keep interest rates high, which could lead to a stronger dollar. Second, tariffs could cause economic weakness in other countries, reinforcing America's strength and creating greater demand for the currency.

However, the tariffs risk hurting the US economy, which could put pressure on the dollar.

While Trump's stance on the dollar is contradictory - he wants it to maintain its dominance but advocates weakening competition to boost US exports - all eyes will be on the effects of the tariffs.