The U.S. dollar extended its sharp sell-off on Tuesday (January 27), sinking to its lowest level in nearly four years against a basket of major currencies after President Donald Trump dismissed concerns about the greenback’s decline, telling reporters he believed its value was “great.”
Trump made the remarks during a stop in Iowa ahead of a speech expected to focus on the economy, as he works to energize rural voters in a state that will host key congressional races later this year. When asked directly whether he thought the dollar had weakened too much, the president waved off the concern.
“No, I think it’s great, the value of the dollar… dollar’s doing great,” Trump said.
Markets reacted swiftly. The dollar index, which tracks the U.S. currency against six major peers, accelerated its decline following the comments, sliding as much as 1.4 percent to an intraday low of 95.566 — its weakest level since February 2022.
Investors interpreted Trump’s remarks as a signal that the White House is comfortable with, or even supportive of, a weaker dollar, adding fresh momentum to an already bruised currency.
“If you look at China and Japan, I used to fight like hell with them, because they always wanted to devalue,” Trump said later, referencing long-standing complaints about Asian trading partners manipulating their currencies.
While Trump insisted he did not want to see the dollar fall further, he added that he would prefer it to “seek its own level,” language traders viewed as tacit approval for market-driven depreciation.
“Trump’s remark signals to the market that the U.S. would prefer a weaker dollar,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets. “The market is happy to give it to them.”
The dollar’s weakness has been building for days, driven by a combination of political risk, trade tensions and growing unease over U.S. monetary policy independence.
One major source of concern is renewed speculation about possible coordinated currency intervention by U.S. and Japanese authorities to curb excessive dollar strength against the yen. That speculation intensified after reports that the New York Federal Reserve had checked dollar-yen rates with dealers late last week — a move often interpreted as a precursor to official action.
Although neither Washington nor Tokyo has confirmed any intervention plans, Japanese officials said on Monday they were in close coordination with the U.S. on foreign exchange matters, adding fuel to market expectations.
“While there are several potential culprits for the dollar’s drop, the main driver is the fallout from reports that the U.S. Treasury is considering direct currency intervention,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.
The yen surged as much as 4 percent over the past two sessions, pushing the dollar below 153 yen for the first time in weeks. It was last trading around 152.23 per dollar.
Trump’s aggressive trade rhetoric has also weighed heavily on sentiment. Late Monday, he accused South Korea’s legislature of failing to uphold its trade commitments to Washington and said he would raise tariffs on South Korean imports — including automobiles, lumber and pharmaceuticals — to 25 percent.
South Korea is Asia’s fourth-largest economy and a key U.S. ally, and the threat rattled markets. The Korean won jumped 1 percent on Tuesday to 1,431.85 per dollar as investors bet that trade frictions would further undermine the greenback.
Trump has also warned he would impose a 100 percent tariff on Canada if Ottawa proceeds with a trade agreement with China, deepening fears of a widening global trade conflict.
Meanwhile, political tensions in Washington are adding another layer of uncertainty. A standoff between Republicans and Democrats over funding for the Department of Homeland Security — following the fatal shooting of a second U.S. citizen by federal immigration officers in Minnesota — has revived fears of another federal government shutdown.
“With the ‘tariff man’ showing no sign of repentance and the U.S. government headed into another shutdown, economic policy uncertainty is soaring once again,” said Karl Schamotta, chief market strategist at Corpay in Toronto. “That’s leading to an intensification in the ‘Sell America’ trade that has dominated markets for much of the past year.”
“Positive fundamentals should eventually reassert themselves,” Schamotta added, “but for now, no one is willing to catch the falling chainsaw that is the U.S. dollar.”
Investors are now turning their attention to the Federal Reserve’s two-day policy meeting, which concludes later this week. Markets broadly expect the central bank to leave interest rates unchanged, but the political implications could be significant.
“The big risk is not the rate decision itself,” said Nick Rees, head of macro research at Monex. “We’re pretty confident the Fed will hold rates steady. But Trump is not going to like that.”
The president has repeatedly urged the Fed to cut rates to support growth and boost exports, and analysts say a standoff between the White House and the central bank could further undermine confidence in U.S. economic stewardship.
Rees added that Trump could move quickly to announce a candidate to succeed Federal Reserve Chair Jerome Powell, particularly if the president publicly criticizes the Fed’s decision.
As the dollar slid, major global currencies rallied sharply. The euro climbed 1.4 percent to $1.20375, breaking above the $1.20 level for the first time since June 2021. Sterling rose 1.2 percent to $1.3844, its strongest level since September 2021.
Against the broader basket, the dollar index last stood near 95.77, marking its deepest trough in almost four years — and underscoring how political signals from Washington are increasingly shaping global currency markets.
