As the dollar plummets to its lowest in four years, former President Donald Trump remains unfazed by the currency's downturn.
"The dollar is just fine," Trump stated confidently during a speech in Iowa on Tuesday.
Trump publicly defended the currency's trajectory, emphasizing the economic advantages of its weakening and suggesting that market forces should operate without interference.
"Look at the dollar's value. Look at the deals we're making. The dollar is, the dollar is just fine," he remarked.
"I prefer for it to find its own level," he added.
In response, markets quickly accelerated dollar sales, exacerbating the already declining value of the U.S. currency.
Is Weakening the Dollar a Strategy for U.S. Industry?
Beyond his relaxed demeanor, some analysts—cited by Reuters and other American media—believe Trump may be strategically weakening the dollar to rejuvenate the nation’s manufacturing sector. This is not a new idea.
A year ago, White House economic advisor Stephen Miran released a report arguing that the dollar was "overvalued by 25%" due to its status as a global reserve currency.
This, he explained, hinders American competitiveness.
"A too-strong dollar hurts our exports and allows foreign products to enter too cheaply, affecting U.S. manufacturers," Miran noted back then.
In line with this logic, Trump hinted at his ability to intervene directly if desired: "I could make it go up or down like a yo-yo."
He reiterated his criticism of countries like China and Japan, accusing them of manipulating their currencies:
"I used to fight with them fiercely because they always wanted to devalue... They devalued, devalued, devalued. But our dollar is great," he emphasized.
These signals from Trump have led many to believe that the dollar's current weakness is not accidental but rather part of a broader policy to boost exports and reduce the trade deficit, even if it risks triggering inflationary pressures.
A Sharp Decline Amidst Market Volatility
The dollar has notably depreciated throughout 2026, with a 2.6% drop since January and a 9% decrease during 2025, according to Bloomberg data.
On Tuesday, the dollar index—measuring its value against six major currencies—fell to 95.566, the lowest since February 2022.
Against the euro, the greenback trades around $1.20, a level not seen in years, making U.S. imports more expensive while benefiting European exporters.
The decline occurs amid economic and political uncertainty in the United States.
Fiscal tensions, persistent public deficits, threats to the Federal Reserve's independence, and rumors of coordinated currency intervention with Japan to stabilize the yen have undermined investor confidence in U.S. economic stability.
This is compounded by volatile trade policies, with tariff threats even against traditional partners like Canada.
The Risks and Benefits of a Weaker Dollar
While a weaker currency might signal economic weakness, it doesn't only have negative consequences. In fact, a depreciated dollar benefits certain sectors:
- Exports: U.S. products become more competitive abroad.
- Multinationals: They earn more when converting foreign profits to dollars.
- External Debt: Countries and companies with dollar obligations can pay less from their local currencies.
- Trade Deficit: A lower dollar helps reduce it by promoting exports and discouraging imports.
Moneycorp analyst Eugene Epstein sums it up: "The administration wants a weaker dollar... Basically, it's clear that this is a president concerned about the trade deficit."
However, the currency's weakening also makes imports more expensive and could drive domestic inflation, a risk seemingly unbothering the White House.
Foreign Policy, Fed Pressures, and Geopolitical Signals
The dollar's decline cannot be viewed in isolation. Trump's continuous attacks on the Federal Reserve and public pressure to cut interest rates contribute to its fall.
Since the start of his second term, Trump has questioned the authority of Fed Chairman Jerome Powell, even suggesting his removal.
Moreover, Trump has rekindled diplomatic tensions affecting the dollar's geopolitical status as a reserve currency.
The threat of Greenland annexation, rhetoric against NATO allies, and a push for isolationist policies have led some investors to question the United States' reliability as a global partner.
As the dollar weakens, gold has hit historic highs, exceeding $5,000 per ounce. This surge reflects investors' search for safe-haven assets amid concerns about the direction of the U.S. economy.
Frequently Asked Questions about the Dollar's Decline
Why is the dollar weakening under Trump's administration?
Some analysts believe Trump is intentionally weakening the dollar to boost U.S. manufacturing by making exports more competitive and reducing the trade deficit.
What are the benefits of a weaker dollar?
A weaker dollar can make U.S. exports more competitive, increase multinational profits when converting foreign earnings, reduce the burden of external dollar-denominated debt, and help lower the trade deficit.
How has the market reacted to the dollar's decline?
Markets reacted with accelerated dollar sales, which further intensified the currency's drop, reflecting investor concerns over U.S. economic and political stability.