I think to put the dollar's moves in perspective we have to rewind the clock a bit, and broaden the lens.
What we're seeing now, with the dollar sinking rapidly, is the exact opposite of what was happening a year ago, when it was soaring. "We hit 110 on the dollar index this morning," I wrote last January 13th. "To put that into perspective, since the early 1980s, there have been only two other times the dollar has been this strong."
Now, of course, the opposite is happening. The dollar has slid 11% since then and is trading below 97 this morning. The pace of the decline along with parabolic moves in gold and other metals is certainly causing some consternation amongst market watchers. But it may actually be pleasing news for this administration, except for two major caveats.
Remember, while President Trump may talk about his love for "King Dollar," what the administration actually wants is a much more subtle outcome: a dollar that is a reserve currency, the lifeblood of the global financial system, and a tool to impose sanctions ("a modern-day form of a blockade," as Fed Governor Stephen Miran once put it). Just not one that is so strong it erodes our global competitiveness.
The president himself admitted as much last summer: "It sounds good. But you don't do any tourism. You can't sell tractors. You can't sell trucks. You can't sell anything. It's good for inflation, that's about it." He added, "you make a hell of a lot more money with a weaker dollar."
In other words, the dollar below 97 may be better for a lot of the country than the dollar at 110. But here are the caveats. First and foremost, the inflation point. At the very time the administration is hammering the affordability issue, a weaker dollar does raise the cost of foreign imports and introduces the risk of imported inflation.
Secondly, the metals problem. If gold is soaring (and it topped $5,100 this morning only hours after topping $5,000 for the first time) because central banks are diversifying away from dollars and into gold, that's undermining the administration's goal of retaining the dollar as the global reserve of choice.
But some analysts are pushing back against the central bank narrative. I asked Citi's head of commodities, Max Layton, about this two weeks ago, and he said central bank buying was the dominant force in gold inflows up until about 2022 but had since tapered off, and hedge funds and other financial market participants have since been driving the inflows. And now, retail buyers are flooding in, buying the gold ETF on net every single day of 2026 thus far.
So just be careful of buying gold, or other metals, for the same reason people once flocked into Bitcoin--the "dollar debasement" narrative. Yes, the dollar has weakened, but off of historically strong levels. Meanwhile, the deficit has actually improved.
Even if the dollar sinks to 89, as some technicians like Carter Worth are suggesting, that could be supportive of many key parts of the U.S. economy. The bigger worry was actually back when it was trading at 110.
See you at 1 p.m!
Kelly