The U.S. dollar index posts its biggest single-day drop in years—Is Trump pleased with the outcome?

(Washington, 29th)
U.S. President Donald Trump sought to play down the impact of a weaker dollar on Tuesday (27th, local time), saying the recent depreciation was “not a concern.” His remarks, however, triggered sharp market reactions, with the dollar recording one of its steepest single-day drops in recent years. Analysts said Washington’s tolerance for a softer currency was interpreted as a policy signal, intensifying concerns that the dollar could be entering a longer-term downtrend.

Commenting on recent moves, Trump said the dollar was “doing well.” Despite that, the currency suffered its biggest one-day fall since last year’s tariff measures were introduced. The ICE Dollar Index slid as much as 1.5%, hitting its lowest level since early 2022.

The dollar’s weakness lifted other assets: the euro and the pound rose to around five-year highs, the yen strengthened toward the 152 level, and gold surged above US$5,500 per ounce.

Trump also said he could make the dollar move “like a yo-yo,” noting past currency disputes with China and Japan, which he said often sought weaker currencies to remain competitive—while still relying heavily on the U.S. dollar.

Impact on consumers and trade
A softer dollar has direct implications for consumers. On one hand, it can raise import costs, add inflationary pressure, and reduce the appeal of U.S. assets to foreign investors. On the other, it can improve export competitiveness. Trump said the recent dollar move benefits U.S. businesses, drawing a parallel with Japan’s long-standing preference for a weaker yen to support exports, and adding that the dollar needs to find its equilibrium.

Stephen Jen, CEO of Eurizon SLJ Capital and proponent of the “dollar smile theory,” said Trump’s stance signals the start of a new structural decline in the currency. He argued that U.S. policymakers appear more willing to tolerate an export-friendly exchange rate rather than defend a strong dollar.

Jen warned that markets—long accustomed to a strong dollar alongside a strong U.S. economy—may be underprepared for a scenario in which economic resilience persists while the dollar weakens.