The US dollar fell today after Trump said he was comfortable with a weaker dollar
When asked if he was worried about the dollar falling, Trump told reporters, “No, I think it’s great,” adding, “I think the value of the dollar — look at the business we’re doing. The dollar is doing great,” Bloomberg quoted him as saying.
Trump’s remarks came amid the dollar’s already deepest drop since the tariffs were imposed last year. After his comments on Tuesday, the Bloomberg Dollar Spot Index fell as much as 1.2% and weakened against all major currencies.
The dollar index (DXY) posted its biggest one-day drop since April
While the dollar index, which tracks the U.S. currency against six major trading partners, fell the most in a single day since April 10 last year, when it fell about 2% due to U.S. threats to impose 145% tariffs on China, according to a CNBC report.
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Why analysts warn Trump’s comments could trigger further drops in the dollar
Analysts said Trump’s comments appeared to have given traders the green light to sell the dollar, signaling the administration may favor a weaker currency to boost exports.
The Bank of Nassau’s chief economist, Win Thin, said the US president had “called for another round of selling” that would trigger another drop in the dollar, as quoted by Bloomberg.
He explained that “Many in Trump’s cabinet want a weaker dollar to make exports more competitive,” adding that “they are taking a calculated risk. A weaker currency can be nice until things get messy,” according to Bloomberg.
The rebound of the yen increases the pressure on the US dollar
The dollar’s decline was also influenced by the recent rally in the Japanese yen as traders braced for possible intervention by Japanese officials to support their currency.
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Market uncertainty fueled by Trump policies
But analysts note that Trump’s unpredictable policymaking has added to uncertainty and rattled investors and foreign allies. His threats to take over Greenland, pressure on the Federal Reserve, tax cuts that deepened the deficit, and leadership style have all contributed to market turmoil.
Dollar falls despite rising bond yields and Fed expectations
The dollar’s slide continued despite rising government bond yields and expectations that the Federal Reserve may pause interest rate cuts, a combination that would normally support the currency. Instead, investors have turned to alternative stores of value, such as gold, which according to a Bloomberg report has hit record highs in what is being called a depreciation.
Trump’s mixed views on strong vs. weak dollar
Trump has long expressed mixed views on the dollar. He praised the strong currency for trade leverage while highlighting the benefits of a weaker dollar for US manufacturers. He said last year that “I’m a guy who likes a strong dollar, but a weak dollar makes you a lot more money,” Bloomberg quoted him as saying.
President suggests he could influence US dollar like a ‘yo-yo’
On Tuesday, he suggested he could influence the value of the dollar, saying, “I could make it go up or down like a yo-yo,” as quoted by Bloomberg. He described extreme fluctuations as undesirable and compared them to hiring unnecessary workers to increase the number of jobs.
Trump criticizes Asian economies for currency devaluation
Trump also criticized Asian economies for deliberately devaluing their currencies.
He emphasized that: “If you look at China and Japan, I fought them like hell because they always wanted to devalue their yen. You know? The yen and the yuan and they always want to devalue it. They devalue, devalue, devalue,” he added: “And when I said, it’s not fair that you don’t devalue it, but it’s hard to compete, to devalue. our dollar is great,” quoted Bloomberg.
Frequently asked questions
Why did the US dollar fall on Tuesday?
The dollar fell after Trump said he was satisfied with its decline, prompting traders to sell.
How does the decline in the US dollar affect the price of gold?
Investors turned to gold as a safe haven, pushing it to record highs.
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