Dollars! Everywhere! (But Euros, too.)

It takes more dollars for a lot of things now, after the USD got roughed up a bit in 2025. It’s a sudden hiccup in a period of American Exceptionalism throughout the 2020s, when then US was growing faster than many other areas, with higher rates to boot.

In 2025, however, US growth slowed, the Federal Reserve lowered interest rates, and there was a bit of a rebound in Europe. The ECB, by contrast, was more circumspect, lagging the Fed with respect to easing. Also, the tariff contretemps added to the woes: arguably, uncertainty surrounding trade policy hurt US business confidence more than it hurt foreign exporters. At the same time, instead of repatriating cash, corporations paused investment, amplifying the pressure.

Finally, there is the ever more urgent fiscal situation. The US deficit remained stubborn (as it tends to); global central banks began diversifying their reserves away from the USD and into Gold and Euros.

The EU certainly isn’t a model of fiscal probity, but exchange rates are a zero-sum game. Somehow, suddenly, the EU looked like it had its fiscal situation in better order (on a relative basis).

Of course, this is a rapidly moving target. Still, the gains in hard commodities, which we note below, have room to run. The USD vs. Euro situation (and beauty contest of other fiat currencies) is likely more fluid. It’s not clear that the Euro will continue its strong performance.

The Winners and Losers

• The “Euro-Bloc” Rally: The defining story of 2025 was the broad weakness of the USD against European currencies. With the Euro gaining ~11.8%, every currency pegged to it (from the CFA Franc in Africa to the Danish Krone) automatically rose by the exact same amount. This created a massive, synchronized bloc of winners across Europe and Africa.

• Commodity Comeback: Currencies tied to raw materials had a banner year. The Swedish Krona (+18.2%) and Norwegian Krone (+11.0%) staged a massive recovery after being undervalued in 2024, while the South African Rand (+8.5%) and Australian Dollar (+5.0%) benefited from stabilizing global commodity prices.

• The Inflation Losers: The bottom of the list remains populated by economies suffering from structural hyperinflation. Venezuela (-81%), Lebanon (-89%), and South Sudan (-32%) saw their currencies evaporate as money printing continued unchecked. And, of course, Venezuela has additional problems now.

Country-Specific Peculiarities

• The Pyrrhic Victor: Russia posted the highest nominal gain (+44%), but this is misleading. Strict capital controls mean this rate is largely theoretical for foreign investors, who cannot easily convert Rubles at this price.

• Nigeria (+7.8%): A surprise outlier. After years of crashing, the Naira stabilized and strengthened in 2025 due to aggressive interest rate hikes and improved foreign reserves. It broke its correlation with other struggling frontier markets.

• Lebanon (-89%): The country effectively has multiple exchange rates. The "official" bank rate is often irrelevant to daily life, while the "black market" rate (which this data reflects) shows the true collapse of purchasing power.

• West Bank and Gaza: There is no national currency. The economy primarily runs on the Israeli Shekel (ILS), which gained +3.4%, but the USD and Jordanian Dinar are also widely used parallel currencies.

• Zimbabwe: The country introduced a new currency (the ZiG) to replace the collapsed dollar. While officially it only lost -1.6%, liquidity is extremely low, and most of the economy has re-dollarized (using USD for transactions).

• Switzerland & Liechtenstein (+11.9%): The Swiss Franc acted as the ultimate "safe haven" in 2025, outperforming even the Euro. Liechtenstein uses the Swiss Franc, sharing this stability.

As noted, the world is increasingly dominated by currency blocs, either implicitly or explicitly. The country map indicates the constituents of some of the major unions or pegs, but here is some more detail:

The Eurozone (EUR)

• 20 Official Members (Use the Euro): Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain.

• Unilateral Users (Use Euro without being members): Montenegro, Kosovo.

• Microstates (Use Euro via treaty): Andorra, Monaco, San Marino, Vatican City.

WAEMU — West African Economic & Monetary Union (XOF)

• Currency: West African CFA Franc (Pegged to Euro).

• Members (8): Benin, Burkina Faso, Côte d'Ivoire (Ivory Coast), Guinea-Bissau, Mali, Niger, Senegal, Togo.

CAEMC — Central African Economic & Monetary Community (XAF)

• Currency: Central African CFA Franc (Pegged to Euro).

• Members (6): Cameroon, Central African Republic, Chad, Congo (Republic of), Equatorial Guinea, Gabon.