The US Dollar Index falls below 98.3, with non-US currencies rebounding collectively amid a dual blow from Trump's speech and fund withdrawals.

The US Dollar Index DXY fell over 0.5% intraday to 98.3, marking the latest sign of the dollar’s ongoing pressure over the past few days. Under the dual shocks of Trump’s Davos speech and the Danish pension fund announcing its exit from the US Treasury market, the dollar is facing multiple pressures. Meanwhile, non-US currencies collectively strengthened, reflecting the market’s reassessment of the dollar’s outlook.

Why Is the Dollar Continually Weakening?

Political Events and Market Sentiment

According to reports, after Trump’s speech at Davos on January 21, the dollar index immediately dropped to an intraday low of 98.384. Statements from political figures often influence market expectations regarding dollar policy direction, and this speech clearly triggered a cautious market sentiment.

US Treasury Credit Concerns

More notably, on January 20, Denmark’s pension fund Akademiker Pension announced its exit from the US Treasury market. The fund’s chief investment officer explicitly stated that the US is “basically no longer a good credit object.” This is not an isolated case—global pension funds and institutional investors are changing their attitudes toward US Treasuries, putting long-term support for the dollar under pressure.

Contradictions in Economic Data

The latest US economic data shows GDP at 4.4% (above the expected 4.3%), and initial jobless claims at only 200,000 (better than the expected 210,000). Strong economic data should support the dollar, but market reactions are the opposite—robust economic figures imply the Fed has no reason to cut rates quickly, and high interest rate environments will persist longer, exerting downward pressure on global liquidity seeking assets.

Collective Rebound of Non-US Currencies

As the dollar weakens, non-US currencies saw significant gains on January 22:

This synchronized rise indicates a fairly consensus bearish sentiment on the dollar. When the dollar weakens, commodities and resource-based currencies (such as AUD and NZD) tend to perform better, as these currencies are positively correlated with commodity prices.

Potential Impact on the Crypto Market

A weakening dollar generally supports cryptocurrencies like Bitcoin and Ethereum. According to relevant analyses, a decline in the dollar index suggests a relatively loose global liquidity environment, making risk assets more attractive for capital seeking returns.

However, it’s important to note that this support is conditional. The strong US economic data and the resulting high rate expectations remain significant factors suppressing risk assets. The market needs to find a balance between “dollar weakening” and “sustained high interest rates.”

Summary

The decline in the dollar index reflects a market re-pricing of US assets. Trump’s speech, concerns over Treasury creditworthiness, and conflicting economic data collectively drive the dollar into a correction phase. The collective rebound of non-US currencies is an intuitive manifestation of this trend. For the crypto market, dollar weakness indeed provides some breathing room, but the ongoing pressure from high interest rates cannot be ignored. The key moving forward is to observe whether the Fed will adjust its policy expectations in response to market pressures, which will determine whether the dollar can continue to weaken and influence the global liquidity landscape.