Trump’s ‘Great’ Weaker Dollar Fuels Currency Sell-Off

The U.S. dollar’s decline against other major currencies, which began last year, has accelerated over the past two weeks, reflecting a shifting economic landscape marked by vast fiscal deficits and the prospect of loose monetary policy even as inflation ticks up.

The U.S. Dollar Index, which tracks the greenback’s value against six other major currencies, has slid 3.2% since January 16 and is down 10.4% since inauguration day a year ago. These are significant moves for the currency central to global trade and finance.

When asked on Tuesday if he was concerned about the dollar’s fall, President Donald Trump was untroubled. “No, I think it’s great,” Trump said before a speech in Iowa. “I think the value of the dollar — look at the business we do. The dollar is doing great.”

That apparent endorsement of a weaker dollar prompted a further slide, though Treasury Secretary Scott Besant attempted a course correction on Wednesday. “The U.S. has always had a strong dollar policy,” Besant told CNBC, adding, “but that means we have to get the fundamentals right.”

The dollar index recovered slightly following his comments. Besant also denied that the Treasury was intervening in currency markets to support the Japanese yen, a move traders have suspected in recent days. A strengthening yen would, by definition, correspond to a weaker dollar.

The Trump administration’s currency policy has been ambiguous. It champions a capital spending boom fueled by its tax and deregulation policies and demands large-scale foreign investment in the U.S., which would tend to push the currency higher. At the same time, Trump aims to shrink the trade deficit, boost American manufacturing, and has demanded lower interest rates from the Fed, all while the government runs large fiscal deficits. These factors point toward a weaker dollar.

The stock market has remained strong, buoyed by solid economic growth and an artificial intelligence boom, while the prospect of further interest rate cuts from the Federal Reserve has kept government bond prices stable. But in foreign exchange markets, the dollar has faltered.

Volatile trade and foreign policy—including the imposition of large, shifting tariffs on allies and a demand to acquire Greenland—has fueled a global sense that the dollar is no longer the storm shelter it once was.

Other assets that historically compete with the dollar as a safe haven are gaining. The Swiss franc has risen 4.4% since mid-January, and gold has climbed 15% over the same period.

“Aggressive fiscal expansion, unpredictable trade policy, and sudden policy interventions create uncertainty about growth, inflation, and capital flows,” wrote Nigel Green, CEO of deVere Group, in a note. “Currencies price in risk immediately and, as we are seeing in real time, the dollar is paying the price.”