why is the US dollar DXY falling: Why the US dollar (DXY) plunged to its lowest since 2022 after Trump’s comments in Iowa – here’s what he said
US Dollar Falls Today After Trump Says He’s Comfortable With Weak Dollar
Asked if he was concerned about the dollar’s decline, Trump told reporters, “No, I think it’s great,” adding, “The value of the dollar – look at what we’re doing. The dollar is doing great,” as quoted by Bloomberg.
Trump’s remarks come as the dollar is already in its deepest decline since the imposition of tariffs last year. Following his comments on Tuesday, the Bloomberg Dollar Spot Index weakened against all major currencies, falling as much as 1.2%.
Dollar Index (DXY) Had Its Biggest One-Day Decline Since April
The Dollar Index, which tracks the U.S. currency against six major trading partners, had its biggest one-day decline since April 10, when it fell nearly 2% as the U.S. threatened to impose a 145% tariff on China, according to a CNBC report.
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Why Analysts Warn Trump’s Comments Could Trigger Further Dollar Decline
Analysts said Trump’s comments gave investors a green light to sell the dollar and signaled that the administration might opt for a weaker currency to boost exports.
Win Thin, chief economist at the Bank of Nassau, said the US president was “inviting another round of selling” that would trigger a further decline in the dollar, Bloomberg quoted him as saying.
“Many in Trump’s cabinet want a weaker dollar to make exports more competitive,” he said, according to Bloomberg, and “they are taking a calculated risk. A weaker currency may be good until things get disorderly.”
The Rise in Yen Increased the Pressure on the US Dollar
The dollar’s decline was also influenced by the recent recovery in the Japanese yen, as traders braced for possible intervention by Japanese authorities to support their currency.
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Market Uncertainty Resulting from Trump’s Policies
However, analysts say Trump’s unpredictable policies have increased uncertainty and shaken investors and overseas allies. Threats to take over Greenland, pressure on the Federal Reserve, deficit-widening tax cuts and leadership style have all contributed to market unease.
Dollar Falls Despite Rising Bond Yields and Fed Expectations
The dollar’s decline continued despite rising government bond yields and expectations that the Federal Reserve might pause interest rate cuts; this combination would normally support the currency. Instead, investors turned to alternative stores of value, such as gold, which reached record levels in what is called a depreciation trade, according to a Bloomberg report.
Trump’s Mixed Views on a Strong and Weak Dollar
Trump has long expressed mixed views on the dollar. He praised the strength of the currency and emphasized the benefits of a weak dollar for U.S. manufacturers. “I’m the guy who likes a strong dollar, but a weak dollar makes you a lot more money,” he said, as quoted by Bloomberg last year.
President Suggests It Could Affect the US Dollar Like a “Yo-Yo”
On Tuesday, he suggested he could influence the value of the dollar, saying, “I can make the dollar go up or down like a yo-yo,” Bloomberg quoted him as saying. He described extreme fluctuations as undesirable and compared them to hiring unnecessary workers to boost employment figures.
Trump Criticized Asian Economies for Currency Devaluation
Trump also criticized Asian economies, saying their currencies were being deliberately devalued.
He noted: “If you look at China and Japan, I would fight like crazy with them, because they always wanted to devalue their yen. You know what? The yen and the yuan, and they always want to devalue it. They devalue it, devalue it, devalue it,” and added: “And I say it’s not fair that you depreciate, because it’s hard to compete when they depreciate. But they always fought, no our dollar is great.”
FAQ
Why did the US dollar fall on Tuesday?
The dollar fell after Trump said he was pleased with the decline and encouraged traders to sell.
How does the decline in the US dollar affect gold prices?
Investors turned to gold as a safe haven and pushed gold to record levels.
