The US dollar index (USDX) has suffered a sharp move lower over the last week, even as President Trump seeks to deny there is a problem.
USDX – Daily Chart
The USDX has crumbled from a push to 99.00, with the index testing the 96.00 support level again.
The dollar was steady on Wednesday but was still set for its largest drop since April after Trump brushed off the latest slide, which has also led to concerns among European central bankers about the strength of the euro.
The euro moved above $1.20 for the first time since 2021, with the British pound hitting 4.5-year highs. The latest move has also followed speculation of a joint intervention to support the Japanese yen.
Trump said on Tuesday that the value of the dollar was “great” when asked if he thought the latest decline was too much. Traders saw that as a sign to strengthen selling, ahead of the Federal Reserve policy decision, which will come overnight for Asian traders.
Trump’s comments have not supported the greenback after his recent erratic moves on tariff threats and geopolitical threats. Investors are moving to different safe havens as they see the dollar as a risky holding.
The de-dollarization theme is now strong, and investors will be reducing their exposure to all US assets. Bank of France Governor Francois Villeroy de Galhau said in a LinkedIn post that policymakers were “closely monitoring the appreciation of the euro and its potential impact on lower inflation”.
“The US would like a stronger yen. The Japanese certainly don’t want an ever-weakening yen. So, until it’s gone a significant distance, everybody’s on the same side. The euro is, in really effective terms, very strong at the moment and the economy’s not got any inflation to worry about, really,” said Societe Generale’s Kit Juckes.
“The odd man out is the dollar, in the sense that there’s some stubbornness with US inflation, the economy is in very good shape. The asset markets are doing great,” he added.
