Dollar Declines, Scandinavian Currencies on the Rise

Rapid changes in U.S. trade policy weaken the dollar, strengthen Scandinavian currencies, and affect global inflation.

The U.S. dollar is quickly losing value and dominance as investors back off due to shaken confidence in the market. The rapidly shifting U.S. trade policy has unsettled markets and raised expectations for rate cuts by the Federal Reserve, causing capital outflows from the world’s largest economy. As a result, the dollar hit its lowest level in three years.

On Friday, the dollar ticked up slightly after Israel struck Iran, as investors fled to the dollar as a safe haven. Still, even with that small bump, the dollar is on track for its largest weekly decline in a month. As a result of the dollar’s nearly 10% decline this year against a basket of major currencies, other nations are dealing with unforeseen currency shifts that are influencing their inflation and economic growth. Scandinavian currencies have performed the best against the U.S. dollar thus far in 2025. The Swedish crown is up 15%, which is the highest it has done this year compared to the U.S. dollar in at least half a century. Not far behind is Norway's crown, which has increased by 13%, the most since 2008.

Due to the dollar’s decline, the euro, Swiss franc, and Japanese yen have all gained significantly this year, each rising by about 10%. However, there is a cost to this. For the first time in over four years, Swiss inflation fell into negative territory in May. Since the price of imported products has decreased due to the franc's jump, the Swiss central bank is under pressure to consider lowering interest rates below zero once more.