The U.S. dollar fell to a four-year low on Tuesday after remarks by President Donald Trump were interpreted by markets as tacit approval of a weaker currency. The decline reflects growing investor unease over rising trade tensions, political uncertainty, and concerns about the independence of U.S. monetary policy.
Trump remarks trigger fresh selling
The dollar extended recent losses after Trump described the currency’s value as “great” when asked whether it had fallen too much. The comments, made ahead of an economic speech in Iowa, were widely seen as signaling tolerance for further depreciation. Currency traders responded by accelerating dollar selling, pushing the U.S. Dollar Index down 1.4 percent to 95.77, its lowest level since February 2022.
Trade tensions and political risks weigh
Analysts said the dollar’s weakness stems from a combination of aggressive trade rhetoric and domestic political uncertainty. Trump has accused South Korea of failing to honor its trade commitments and announced plans to raise tariffs to 25 percent on South Korean imports, including automobiles, lumber, and pharmaceuticals. He has also threatened to impose a 100 percent tariff on Canadian goods if Ottawa proceeds with a trade agreement with China.
Meanwhile, partisan disputes in Washington over funding for the Department of Homeland Security have revived fears of another U.S. government shutdown, further denting investor confidence.
Federal Reserve independence under scrutiny
Concerns over the Federal Reserve’s autonomy have added to pressure on the dollar. Trump has repeatedly urged the central bank to cut interest rates and is expected to react negatively if policymakers keep rates unchanged at their ongoing meeting. Markets are also watching closely for any announcement regarding a successor to Federal Reserve Chair Jerome Powell, which could increase volatility if viewed as politically motivated.
Yen strengthens; dollar weakness broad-based
In global currency markets, attention has shifted to the Japanese yen, which strengthened sharply amid speculation of coordinated U.S.–Japan intervention. The yen traded near 152 per dollar after reports that the New York Federal Reserve checked dollar-yen rates with market participants.
The euro climbed above $1.20 for the first time since mid-2021, while sterling rose to its strongest level since September 2021, underscoring the broad-based nature of the dollar’s decline.