Dollar posts sharpest daily drop in months
The US dollar fell sharply on Tuesday, posting its biggest single-day decline since April of last year, after President Donald Trump dismissed concerns about the currency’s recent weakness. The greenback dropped 1.3%, extending a broader slide that has seen it lose roughly 10% over the past 12 months.
The move pushed the dollar to its lowest level since February 2022, underscoring growing investor unease over US economic policy, trade tensions, and the administration’s apparent comfort with a weaker currency.
Trump signals approval of dollar weakness
Speaking to reporters during a visit to Iowa, where he was promoting his administration’s economic record, Trump was asked whether he believed the dollar had fallen too far. He rejected that notion outright.
“I think it’s great,” Trump said, arguing that a weaker dollar supports US business activity and competitiveness. He contrasted the current situation with past disputes involving China and Japan, where he frequently accused both countries of deliberately devaluing their currencies to gain an export advantage.
Trump recalled previously pushing back against what he described as repeated devaluations of the yen and yuan, saying such moves made it difficult for US companies to compete on global markets. His remarks signaled a clear shift from earlier rhetoric that emphasized defending the strength of the US currency.
Markets react to policy signals
The decline in the dollar was reflected in the Dollar Index, which tracks the US currency against six major trading partners. The index recorded its steepest one-day fall since April 10 of last year, when it nearly dropped 2% amid escalating trade disputes and threats of sweeping tariffs on China.
That earlier episode was accompanied by sharp losses in US equities, highlighting the sensitivity of financial markets to currency and trade policy developments. While stock markets were more stable this time, currency traders reacted quickly to Trump’s comments, interpreting them as a signal that the administration is unlikely to intervene to support the dollar.
Broader implications for trade and inflation
A weaker dollar can boost US exports by making them cheaper overseas, but it can also raise the cost of imports and add to inflationary pressures at home. Analysts note that Trump’s endorsement of dollar weakness may complicate the Federal Reserve’s efforts to manage inflation, particularly if currency depreciation feeds into higher prices for goods and energy.
With trade tensions still simmering and the administration continuing to reshape US economic policy, investors are likely to remain focused on signals from the White House about its tolerance for further dollar declines.