Trump's Approval of a Weaker Dollar Fuels Fresh Selloff

The US Dollar Index (DXY) plummeted more than 1% in overnight trading to 95.55 — its weakest reading since early 2022. The index staged a modest rebound at the start of Tuesday's session (January 28) but remained capped near 96.00 through Asian trading.

This sharp decline followed comments from Trump during a press interaction in Iowa regarding the falling value of the dollar. Rather than expressing concern, he referred to the situation as beneficial.

"No, I think it's great... I think the value of the dollar — look at the business we're doing. The dollar's doing great," Trump said.

He claimed that he could move the Dollar's exchange rate up and down "like a yoyo" while adding that he preferred the US currency to "find a natural level and that's fair."

This statement was immediately met with negative responses from market participants, accelerating selling pressure on the dollar. The greenback recorded its worst single-session performance since April 2025.

The US President's comments also added a risk premium for investors holding USD-denominated assets. Markets are already weighing the potential impact of Trump's tariff agenda, questions surrounding Federal Reserve independence, and rising geopolitical tensions. Now, the prospect of further foreign-exchange intervention by US authorities has entered that list of concerns.

KBC Bank noted that Washington's willingness to sell its own currency to 'help' Japan stabilize the yen suggests the US administration is, for now, not seeking to obstruct trades that weaken the dollar.

Investor attention is now shifting to the outcome of the Federal Open Market Committee (FOMC) meeting. Policymakers are widely expected to keep interest rates unchanged, so the main focus is now on the Fed's statement regarding its independence and their forward guidance. Additionally, the market is also watching for the possibility of Trump announcing the official candidates for the next Fed chair sometime soon.