The U.S. Dollar Index — a gauge of the value of the greenback versus other major currencies — is down over 5.5% from a more than two-year high in mid-January. And it’s fallen sharply in just the last few weeks.

Now, keep in mind that from the lead-up to the November election until early this year, the U.S. dollar was on a roll. That was based on markets thinking the U.S. economy was stronger than most others, that the Federal Reserve would likely cut interest rates more before long, and that tax cuts and other stimulus were coming.

Instead, now what we’ve got is the markets worrying about tariff flip-flops and other policy uncertainty, and U.S. economic weakness.

Textbook economics will tell you that significant, sustained shifts in a currency’s value can indicate a country’s economic strength or weakness. 

“It’s a pretty sizable move. The euro is about 6% up against the dollar,” said Jonas Goltermann at Capital Economics of the recent rise in the euro versus the U.S. dollar. “And the move last week in the euro was one of the biggest over the past three or four decades.”

It’s a significant reversal in economic fortunes, said political economist Sharyn O’Halloran at Trinity College Dublin. 

“Last year, the U.S. was doing well while Europe was very sluggish,” said O’Halloran. 

Now, Germany’s new government has pledged to boost spending on infrastructure and defense, which will juice the Continent, Goltermann said. 

“In Europe, there’s a newfound optimism, a sense that maybe we hit rock bottom, and that now things are going to change for the better on the economic front,” said Goltermann. 

Here in the U.S., amid growing uncertainty about tariffs, inflation, interest rates, taxes and federal spending, the stock market has fallen sharply. 

“There’s a question around the U.S. tech firms — are they going to be able to hang on to their exceptionalism — causing people in Europe and the rest of the world to reconsider whether they want to put so many eggs into the U.S. basket,” said Goltermann.  

Keep in mind that heightened global economic uncertainty typically boosts the dollar. But Goltermann said these are not “typical” times. 

“We often say the dollar is a safe haven,” Goltermann said. “But if the uncertainty is emanating from the U.S., it tends to be less true.” 

Bottom line, said Joseph Gagnon of the Peterson Institute for International Economics: “There is so much uncertainty, and the tariffs are so destructive, they’re causing people to put spending, especially big business investment plans, on hold. And that raises the risk of a recession, scares the markets, and would also call for Fed cuts and a weaker economy.”

And, Gagnon said, drive down the dollar.