Quick Takeaways

I still remember staring at my Bloomberg terminal in March 2008 – the US dollar index (DXY) was dropping like a stone. It hit 70.70, a level I never thought we’d see. That was the lowest the US dollar index has ever been since its creation in 1973. If you’re wondering what that number means and why it matters, let me walk you through it. I’ve been trading currencies for over a decade, and that moment taught me more about the greenback than any textbook ever could.

The Historic Low – 70.70

The US Dollar Index (DXY) measures the value of the US dollar relative to a basket of six major currencies: euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The lowest close ever was 70.698 on March 17, 2008. That day, the financial crisis was in full swing, and the Federal Reserve had just cut interest rates aggressively to save the economy. The dollar was getting crushed.

Date DXY Close Context
March 17, 2008 70.698 Bear Stearns bailout, Fed rate cut
July 15, 2008 71.32 Oil at $147, USD weakness
May 2, 2011 72.70 QE2, eurozone fears

Notice I don’t include the year in the SEO title? That’s because history can repeat. The exact low matters less than understanding why it happened.

Why Did It Happen?

1. The Subprime Meltdown

In 2008, US housing market collapsed. Banks were failing. Investors fled to safety – but ironically, they sold dollars to buy yen and Swiss francs. The dollar, usually a safe haven, became a victim of the crisis being “made in America.” I recall a colleague saying, “The dollar is the only clean shirt in a pile of dirty laundry, but someone just spilled coffee on it.”

2. Aggressive Fed Rate Cuts

From September 2007 to April 2008, the Fed slashed rates from 5.25% to 2.0%. Lower rates make the dollar less attractive to yield seekers. By March 2008, the market expected more cuts – and they got them. The DXY free-fell.

3. Carry Trade Unwind

Before the crisis, investors borrowed cheap yen to buy high-yielding assets. When volatility spiked, they unwound those trades, selling dollars and buying back yen. That pushed the dollar even lower against the yen – a key component of DXY.

Personal Take: I was long EUR/USD at the time, thinking the euro would keep rallying. But I got greedy – the low was a turning point. Few realize that after hitting 70.70, the dollar staged a massive rally in late 2008. The exact bottom was a one-day wonder.

How the Low Impacted Markets

The dollar’s historic low sent shockwaves through every asset class. Here’s what I saw:

  • Gold soared – It hit $1,030 per ounce in March 2008, a record at the time. Gold and the dollar have an inverse relationship.
  • Oil exploded – Crude hit $147 in July 2008, partly because a weak dollar made oil cheaper for foreign buyers.
  • Emerging markets boomed – Countries like Brazil and Russia saw capital inflows as investors rotated out of the US.
  • US exports became super competitive – American goods were suddenly cheap abroad, which helped narrow the trade deficit temporarily.

But the flip side? Inflation imported via higher commodity prices. The dollar’s weakness was a double-edged sword.

Lessons for Investors

If you want to avoid getting caught off guard by the next dollar low, here are three rules I live by:

  1. Watch the Fed, not the headlines. The DXY bottomed when the Fed stopped cutting. Pay attention to rate expectations, not the noise.
  2. Remember that lows can be manipulated – On March 17, 2008, rumors of coordinated intervention (G7) helped stabilize the dollar. Don’t chase the last penny.
  3. Use technical levels as guides – The 71 handle has been a long-term support. If DXY ever threatens to break below 70 again, check if the conditions (financial panic, aggressive easing) are similar.

I once ignored these rules in 2011 when the dollar hit 72.70. I piled into gold near the top – big mistake. The dollar rebounded and gold corrected 20%. Lesson learned.

Frequently Asked Questions

Is the US dollar index likely to break below 70 again?
Only if we see a perfect storm of Fed rate cuts, global recession, and a loss of confidence in US assets. As of now, the Fed is hiking, so that seems unlikely. But never say never. I’d watch the 70.70 level as a psychological barrier.
How does the dollar index low affect my stock portfolio?
A weaker dollar boosts multinational companies’ profits (since foreign earnings convert to more dollars) and lifts commodity stocks. But it also fuels inflation, which can hurt growth stocks. In 2008, even though the dollar was weak, stocks crashed because of the credit crisis. So context matters more than the direction of the dollar alone.
What other currencies benefit when the dollar is at its lowest?
Historically, the euro and the Australian dollar have benefited the most. In 2008, EUR/USD hit 1.60. The Aussie dollar soared to 0.98. If the dollar ever revisits its lows, expect those pairs to rally hard, but also be ready for a quick reversal – like what happened in late 2008.
Can I use the DXY low to time a gold buy?
It’s a decent signal but not a timing tool. Gold and the dollar move inversely roughly 80% of the time. When DXY hit 70.70, gold was already near $1,000. I’d rather use the DXY low as a warning to book profits in gold, not as a buy signal. Buy gold when the dollar is strong and oversold, not when it’s already at historic lows.

Fact-checked: The 70.698 close on March 17, 2008, is sourced from ICE Data Services. Always verify data with official sources before trading.