The dollar index fell with a bang: what threat does this pose to the Russian economy?

One of the main global financial news of the past week was the strongest fall in the dollar index against a basket of world currencies (DXY) in half a century. This index fell by more than 10%, which was the strongest decline in the currency in the first half of the year in the last half a century - since 1973, when the dollar rate fell by 15%, writes the Financial Times. The dynamics of the American currency rate also became the weakest in any six months in a row since 2009. Why did the dollar weaken so sharply during the second presidency of Donald Trump and how beneficial is this for the ruble?

Let us recall that the dollar index shows the value of the US dollar against a basket of six major currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc. It shows how the dollar rate is changing compared to these currencies combined. If the index rises, the dollar is strengthening; if it falls, the dollar is weakening.

Given that the dollar has long been the world's leading reserve currency, it is hardly an exaggeration to say that the DXY is being closely watched by financiers, investors and currency speculators around the world.

The fall of the dollar index in 2025 could be caused by many factors, including changes in monetary policy, the level of inflation, geopolitical instability and competition from other currencies. Also, the rise to power of Donald Trump, his introduction of a number of changes in the US trade policy and the conflict with the head of the Federal Reserve played a role. And the introduction of tough tariffs on imports from most key trading partners by the president provoked a massive sell-off of American assets.

What do domestic financiers think about the large-scale fall of the dollar index and its impact on the global and Russian currency markets? Vasily Girya, CEO of GIS Mining, named the key reasons for the fall of the dollar index as the softening of the rhetoric of the US Federal Reserve, expectations of a reduction in the key rate in America, the growth of trade imbalances and the decline in investment demand in the world for dollar assets. In addition, according to him, "additional pressure on the dollar was exerted by the foreign policy agenda, mainly the uncertainty associated with the trade and geopolitical initiatives of the Trump administration."

But the main question remains the impact of the fall of the dollar index on the Russian market and economy. After all, it turns out that a fall of the dollar index means a weakening of the US dollar against other currencies, including the ruble. And the strengthening of the ruble with the fall of the dollar will make imported goods cheaper for Russians, reducing prices for foreign goods and services.

"The factor of a weak dollar in the main world currency basket is also included in the ruble quotes, which have risen in value against it by almost 25% in the first half of the year," says Spartak Sobolev, head of the investment strategy research department at Alfa-Forex. "This means a significant reduction in inflationary pressure in the import component and, as a result, the Central Bank's ability to reduce the key rate more quickly."

Thus, the strengthening of the ruble and the weak dollar create conditions for a more comfortable reduction in the Central Bank's key rate (the next meeting on this issue will take place at the end of July), which can support economic growth and reduce the cost of borrowing in the economy.

But not everything is so clear-cut. Russian exports, which are often tied to the dollar, are becoming less profitable as the ruble strengthens and exporters' income in rubles decreases. This may reduce the competitiveness of Russian goods on the world market. "In a situation where the national currency is becoming more expensive, Russian exports are losing revenue, and interest in imports is growing," explains Spartak Sobolev.

However, cheaper imports in dollar terms can make inflation risks softer and support consumption, believes Vasily Girya. "Retail and manufacturers with a high share of imported components will benefit," the expert says.

This means that retailers (companies or stores that sell products directly to end consumers) and manufacturers that use a lot of imported components in their products are in a better position than those who rely entirely on domestic parts or manufacturing.

The situation cannot be called stable and unambiguous, the fall of the dollar in the current geopolitical and economic situation carries a number of risks for the Russian economy, Vasily Girya pointed out. "The key risk for the ruble with a further decline in the dollar is the possible increase in pressure on export revenue. Too strong a strengthening of the ruble can hit the competitiveness of domestic goods and complicate investments in raw materials and energy-intensive industries," the expert believes.

According to expert estimates, the fall of the dollar index is an ambiguous factor influencing the Russian economy. On the one hand, a fall in the dollar index may affect the cost of goods that Russia sells abroad, reduce their sales volume and, accordingly, export revenues. And difficulties with exports may make it difficult to attract investment in such industries as mining and energy production. On the other hand, a fall in the dollar index entails a strengthening of the ruble, which makes imported goods cheaper and makes life easier for consumers.