Dollar Falls To Four‑Year Low, Trump “Adds Fuel To The Fire”: Not Worried, Dollar Performing Well, Will Find A Reasonable Level

Investor concern over the unpredictability of U.S. policy has intensified as the dollar slid to its weakest level against major currencies in four years. President Trump, however, expressed little alarm. On Tuesday he stated that the dollar was performing well, that he was not worried about its decline, and that exchange rates would naturally fluctuate.

When asked whether he was concerned about dollar depreciation, Trump responded that he believed the dollar was “doing great,” citing ongoing trade activity as evidence of its strength. He added that he hoped the dollar would “find its own reasonable level,” which he described as the fair outcome.

Trump also suggested he could influence the currency’s path, saying he could make it move “like a yo‑yo,” but he cautioned that such manipulation would be unwise. He likened deliberate intervention to hiring unnecessary workers solely to boost employment statistics and criticized certain Asian economies he believes pursue currency devaluation.

Despite the president’s reassurances, commentators argue the dollar’s decline may persist. Structural pressures—including concerns about Federal Reserve independence, widening budget deficits, fiscal profligacy and heightened political polarization—continue to weigh on the currency.

Following Trump’s remarks, late Tuesday U.S. time, the ICE Dollar Index (DXY) extended losses, briefly falling below 96.00 to around 95.60, its lowest level since February 2022, with an intraday decline of roughly 1.5%. Bloomberg’s Dollar Spot Index also recorded a fourth consecutive daily decline, touching its weakest point since March 2022 and falling more than 3% over the past six trading days, marking the steepest run since last April when reciprocal tariff announcements were made.

Elias Haddad, Global Market Strategist at Brown Brothers Harriman & Co., observed that structural drivers undermining the dollar—such as diminished confidence in U.S. trade and security policy, the politicization of the Fed and deteriorating fiscal credibility—could outweigh neutral cyclical factors and push the currency lower.

As the dollar softened, other major currencies strengthened. The yen appreciated just over 4% across three trading sessions. The euro rose above 1.1280 after U.S. market close and traded at levels not seen since June 2021, while the pound approached 1.3870, its highest since September 2021. An emerging‑market currency index climbed for a fourth straight day and reached record highs amid the dollar’s retreat.

Dollar Weakness Reflects Policy Uncertainty In Washington
The dollar’s weakness reflects investor caution amid unpredictable policy signals from Washington, including President Trump’s threat to seize Greenland. Bloomberg reported that investors have sought hedges against further dollar depreciation, with short‑dated option premiums rising to the highest levels since Bloomberg began compiling the series in 2011.

Trading volumes through the Depository Trust & Clearing Corporation reached the second‑highest level on record on Monday, surpassed only by the sell‑off on April 3 of last year. Barclays analysts noted that dollar risk premiums were rebuilding and pointed to the dollar’s poor performance following Trump’s Greenland comments.

Uncertainty over the next Federal Reserve chair has also pressured the currency. Some analysts expect Trump to announce a successor to Jerome Powell after the Fed’s rate decision, particularly if the president disagrees with the outcome. The administration’s criminal inquiry into Powell and efforts to remove Fed Governor Lisa Cook have added to market attention around the meeting.

Additional uncertainty stems from the administration’s apparent preference for a weaker dollar and the risk of a federal government shutdown. Democrats have pledged to block spending legislation unless funding for the Department of Homeland Security is removed, raising the prospect of a funding impasse.

Yen Rally Fuels Intervention Speculation
The yen’s recent strength has been another factor in the dollar’s decline. After reports last Friday that Japan might intervene in currency markets, possibly in coordination with the United States, the yen rose for a third consecutive session. By late Tuesday U.S. trading, the dollar fell to about 152.10 yen, down more than 1.3% and at its weakest since late October 2025.

On Friday the yen experienced two sharp rallies in a single day. Markets initially suspected a rate check by Japan’s Ministry of Finance, a move often interpreted as a warning to traders. Subsequent media reports citing traders said the New York Fed had queried dealers for dollar‑yen quotes, which Wall Street interpreted as a sign the Fed might assist Japanese authorities in direct intervention to support the yen.

Japanese Finance Minister Satsuki Katayama reiterated after a G7 meeting that Tokyo stood ready to coordinate with the United States and, if necessary, take “appropriate measures” on exchange rates. Nomura’s foreign‑exchange strategy team noted that Tuesday’s dollar‑yen pattern resembled prior episodes when authorities intervened in 2022 and 2024, describing the decline as a sequence of falls following an initial sharp drop—consistent with past intervention dynamics.

The Bank of Japan’s daily current account balance data, due Wednesday, may shed light on whether the Ministry of Finance intervened and on the scale of any action. The prospect of coordinated intervention has made investors reluctant to push the yen lower. Parisha Saimbi, an Asia FX and local markets strategist at BNP Paribas, said signs from the United States suggested multiple parties might be prepared to step in, a development distinct from previous episodes.

Although officials in Tokyo and Washington have not confirmed rate checks, BOJ money‑market data indicate that last Friday’s yen surge may not have been driven by Japanese intervention. George Catrambone, Head of Fixed Income at DWS Americas, said the Fed’s rate check last Friday “further pressured the dollar,” and added that resilient global growth expectations—reflected in rising equity markets—may encourage investors to seek higher returns outside the United States.

Karl Schamotta, Chief Market Strategist at Corpay, argued that Washington’s tilt toward protectionism and reduced security commitments are prompting other countries to increase defense spending and sharpen competitive priorities, thereby eroding growth and interest‑rate advantages that previously supported the dollar. Nick Rees, Head of Macro Research at Monex, observed that macro traders are increasingly treating the dollar as being in a downward channel, irrespective of whether the Fed coordinates intervention.

Markets currently expect the Fed to hold rates steady at its upcoming meeting, with pricing implying two 25‑basis‑point cuts later in the year—an outlook that contrasts with expectations for several other major central banks. Kit Juckes, Head of FX Strategy at Société Générale, cautioned that a potential partial U.S. government shutdown and lingering concerns among dollar bulls mean U.S. growth will remain the key determinant of how much the Fed eases and whether the dollar can weaken substantially from current levels.