▶ Full Post Text
The US dollar is steadying after sliding on January 27^(th) in its biggest one-day decline since April's global tariff shock, and has been falling since Donald Trump took office a year ago. It fell throughout 2025 but has fallen sharply since the beginning of this year, and it's now at a four-year low against the world's major currencies.
The dollar is already down over 10% this year from its 2025 high point, and most analysts say it is due to macro headwinds (external economic stuff). These external sources of friction for the dollar include the world's central banks’ diversification away from the dollar, worsening US deficits, and concerns about the Fed's independence. Additionally, there are significant geopolitical issues, including Venezuela, Greenland, and new tariff threats against Canada and Korea. These geopolitical headlines might just be talk, but they are all potentially destabilizing.
President Trump, who spoke in Iowa on January 27th, downplayed concerns over dollar weakness, saying he was comfortable letting the dollar “seek its own level” in the marketplace, according to Yahoo Finance. The markets view this as a sign that the Trump Administration prefers a weaker dollar, as it could boost US manufacturing and exports.
The dollar is still strong. For instance, with the exception of 1985, the dollar is currently stronger against the British Pound than at any time in the last fifty years; it’s just that the dollar is expected to be even stronger as the world's tentative reserve currency. Although the dollar has fallen, it remains comparatively strong historically. There are positives to a weaker dollar. As the Trump Administration often says, a weaker dollar can stimulate the economy. That is because it makes our US exports more attractive to overseas buyers, who pay less for the goods. Many American companies earn substantial profits abroad, and when the dollar weakens, those profits rise and boost earnings, which is great for stocks.
It is very unusual for a president or even a treasury secretary to speak about their desires for the dollar as a currency. For decades, the policy of both Democrats and Republicans in office was to maintain a strong dollar and never comment on it. Of course, these are unusual times.
The Federal Reserve met today and held rates steady after three consecutive cuts. The Fed is expected to resume cutting rates later this year, which plays into the dollar's weakness by making it slightly less attractive to hold. The upcoming Fed speakers and the released notes from the January 28th Fed meeting could serve as a pivotal crossroad for the dollar’s long-term trend. Any hawkish (tough) language in the Fed’s commentary could strengthen the dollar and calm the investors. On the contrary, a dovish (weaker) tone could further weaken the dollar. This needs to be watched.
In the accounts I manage, I have leaned into some foreign currency holdings as a diversifying hedge against the dollar, and I am glad I did. I still feel good about the market this year, but feel like it will take some tactical massaging to win in these unique times.
\#dollar
\#fed
\#currancy
[www.FerventWM.com](http://www.FerventWM.com)