The dollar slid to a four-month low as traders wrestle with talk of coordinated U.S.-Japan FX moves, rising political risk, and shifting rate expectations, while gold and silver raced to record highs on safe-haven demand and stronger-than-expected U.S. durable goods data.
The dollar index fell about 0.6% today, marking a clear break lower from recent ranges. Markets say the move is tied to growing chatter that Washington and Tokyo could quietly work together to support the yen, which would pressure the greenback further.
President Trump’s stance that a weaker dollar helps American exporters is being taken seriously by traders, and that view is coloring how officials and markets behave. Reports that U.S. authorities called banks last Friday for dollar/yen quotes added fuel to the speculation and signaled that policymakers are watching exchange rates closely.
Political noise is amplifying the currency move, with foreign investors pulling some capital from the United States amid uncertainty. Headlines about Greenland and tough talk on trade are making global investors more cautious about U.S. exposure, which adds to dollar selling pressure.
On trade, the president’s readiness to levy tariffs if Canada pivots toward deals with geopolitical rivals is being read as a tough negotiating posture rather than chaos. From a Republican perspective, a firm stance on trade is a negotiating tool to open markets and protect American jobs, even if it rattles short-term flows.
Domestic politics also matter. The risk of a partial government shutdown is real after Senate Democrats threatened to block funding over Homeland Security issues tied to an ICE shooting incident. That kind of brinkmanship unnerves markets and chips away at dollar strength when investors prefer predictable governance.
Still, the dollar found pockets of support from today’s U.S. durable goods report, which surprised to the upside. Orders jumped by 5.3% month-over-month, beating expectations and suggesting a faster pace of industrial demand than many had assumed, giving the currency a modest bounce.
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EUR/USD is trading higher on the dollar pullback, reflecting the changing tone in global rates and risk sentiment. The German IFO showed business climate was unchanged, with both current assessments and expectations slightly softer than forecasts, underscoring uneven growth in Europe.
USD/JPY fell sharply, down more than 1% as the yen benefited from the intervention chatter and a market that now prices a material chance of coordinated steps. The BOJ last week held rates steady, voting 8-1 to keep the overnight call rate at 0.75%, but the intervention rumors trumped that decision in market moves.
Looking ahead, swaps show markets assigning almost no chance of an ECB hike at the next meeting, while expectations for medium-term moves tilt toward a Fed that will ease later in 2026. Traders see roughly a 3% probability of an immediate Fed cut this week, but more substantial easing is priced into next year.
Precious metals exploded higher, with gold and silver hitting fresh records as investors sought safety from political and policy uncertainty. Silver got extra lift from the durable goods beat, highlighting its industrial role, while gold drew demand as a store of value amid talk of easier Fed policy and growing central bank buying.
Central banks remain big buyers, and that matters. China’s reported increases in bullion and global central bank purchases have been persistent, while long positions in gold and silver ETFs are at multi-year highs, showing both official and private investors are piling into metal as a hedge.
