In Reply to: How not to fight inflation. Higher housing prices posted by mh on January 30, 2026 at 10:58:53
After a dramatic 2025, when US President Donald Trump's tariff announcements sent the dollar tumbling, traders of the currency were expecting a quieter year.
Recent weeks have shattered that complacency.
The dollar dropped to its lowest point in four years on Tuesday against a basket of currencies, hitting multi-year lows against the Euro and the pound as it fell 3% in roughly a week.
That slide has since slowed down, but analysts say the reprieve is likely to be temporary.
"Most people would think the dollar should, could, and would weaken further this year," said Chris Turner, global head of financial market research at ING. "The jury's out on the timing but less so on the direction."
A weaker dollar reduces purchasing power for Americans - something overseas travellers know all too well. If that carries on, analysts say it risks fuelling inflation inside the US, as Americans face higher prices for imports.
The falls have also raised bigger questions about whether the dollar's status as the world's go-to currency - which for decades has helped keep borrowing costs in the US relatively low - might be under threat.
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Why is the dollar falling?
Analysts say say the dollar's downturn is in part a sign of market concern about the Trump administration's policies.
"In my opinion, what markets are reacting to is just sort of the haphazard nature of policy in this administration - the escalation, de-escalation," said Robin Brooks, senior fellow at the Brookings Institution and former FX strategist at Goldman Sachs, pointing to similarities between the backlash over tariffs and Greenland.
The dollar's decline "is a reflection, basically, of markets saying this kind of chaotic back and forth hurts the US more than anyone else," he said.