Dollar Breaks 2021 Levels After Trump Downplays Weakness

The US dollar is breaking multi-year support levels across the board as global markets reassess the administration's appetite for currency strength. Tuesday's price action suggests that appetite may be nonexistent.

The dollar entered the US session already weakened from European trading but still within recent ranges against major currencies. That changed quickly. Consumer confidence data printed at the lowest level since 2014, catching analysts off guard and sending 2-year Treasury yields higher while the dollar extended losses. Price action chopped around key extremes through the US morning, with traders reluctant to push further without a catalyst.

Then President Trump provided one.

Speaking to reporters in Iowa, Trump dismissed concerns about the dollar's steepest four-day slide since April's tariff announcements. "No, I think it's great," he said when asked about the decline. "I think the value of the dollar — look at the business we're doing. The dollar's doing great." He added that he wanted the currency to "seek its own level, which is the fair thing to do." Trump also suggested he had direct influence over currency valuations, telling reporters "I could have it go up or down like a yo-yo" while criticizing Asian economies he claimed had deliberately weakened their currencies. The dollar hit fresh lows in minutes as a result.

The damage across major pairs:

• EUR/USD now trading above 1.2000 for the first time since 2021
• GBP/USD cleared 1.3850, also the highest since 2021
• USD/JPY down 4% since Friday's open
• USD/CHF approaching 0.7600—levels not seen since 2011
• AUD/USD above 0.7000 for the first time since 2023

Beyond the technical extremes, the fundamental signal is what may concern dollar bulls most. Tuesday's comments reinforce a growing perception that the Treasury, as an extension of the White House, may not just tolerate a weaker dollar — it may actively prefer one.

Markets caught an early hint of this shift on Friday when reports emerged that the New York Fed had conducted rate checks with banks on USD/JPY. The move sparked speculation about coordinated yen support involving not just the Bank of Japan but the Fed as well, a combination last deployed in 1998. That alone was enough to pressure USD/JPY on Friday, and the weakness spread into broader dollar markets. Trump's comments are now reinforcing that narrative.

Tomorrow's FOMC decision is expected to be uneventful. A rate hold is fully priced and there's little in the way of updated projections. But Powell may face questions on topics the Fed typically sidesteps, and whether he engages could matter. A reaffirmation of Fed independence or any hawkish lean might pause the bleeding temporarily. But with US officials broadcasting comfort with dollar weakness, fewer traders may be willing to fade the move. The calculus has changed: fighting the trend now means fighting the policy backdrop too.

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