Core Viewpoint - The recent decline of the US dollar index is attributed to a crisis of confidence in the dollar, compounded by structural and cyclical factors, marking a shift from previous economic cycle-driven fluctuations [2][5][7]. Group 1: Dollar Index Performance - The dollar index experienced a significant drop of over 10% in the first half of the year, falling from a peak of 110 in January to a low of 96.4578 by July 1, marking its lowest level since February 2022 [3][4]. - The decline began after the dollar index briefly touched the 110 mark, followed by a series of negative economic signals, including rising inflation and discussions of stagflation risks [3][5]. - Key events influencing the dollar's trajectory included changes in US tariff policies, which led to a drop below the 100 mark in April, and ongoing concerns about US economic performance [3][5]. Group 2: Non-US Currencies - In contrast to the dollar's decline, non-US currencies have generally appreciated, with the euro rising over 13% against the dollar in the first half of 2025, and the Chinese yuan showing resilience with a 1.82% appreciation in the onshore market [4][6]. - The strengthening of the yuan is attributed to both the passive appreciation effect from the dollar's weakness and robust domestic economic policies that support growth [6][8]. Group 3: Economic Factors and Outlook - Short-term factors contributing to the dollar's decline include expectations of a US economic slowdown and potential interest rate cuts by the Federal Reserve, while long-term concerns revolve around a broader credit crisis affecting the dollar's status [5][7]. - Analysts predict that the dollar index may continue to face downward pressure due to uncertainties in US trade policies, increasing concerns about US debt, and a shift in investor sentiment towards diversifying away from dollar assets [7][8]. - The expectation is that the dollar index will remain below 100, with a gradual appreciation of the yuan against the dollar, moving from a central rate of 7.1 towards 7.0 [8].

Group 1 - China has significantly reduced its holdings of US Treasury bonds from $1.3 trillion to $759 billion, indicating a strategic shift in response to perceived risks associated with US debt [3][10][15] - The scale of China's sell-off has exceeded market expectations, with estimates suggesting a reduction of $500 billion to $600 billion, highlighting the intensifying geopolitical tensions [13][15] - In response to the declining confidence in US Treasuries, China is increasing its gold reserves, signaling a reconfiguration of its risk management strategy [3][15] Group 2 - The trust in US Treasury bonds is eroding due to rising US debt levels and the aggressive trade policies of the Trump administration, leading to a crisis of confidence among global investors [5][10] - The Federal Reserve's decision to maintain interest rates and warnings about inflation and unemployment risks have further diminished market confidence in US debt instruments [6][17] - Trump's pressure on the Federal Reserve to lower interest rates reflects his awareness of the potential economic consequences, including the risk of stagflation, which could severely impact the US economy [8][17] Group 3 - The global financial market is witnessing a shift in investment strategies, with investors now requiring higher yields to consider US Treasuries, indicating a significant change in risk appetite [10][11] - The ongoing geopolitical tensions and economic uncertainties necessitate careful adjustments by the Trump administration to restore confidence in the US economy and its debt instruments [18][20]