Markets brace as dollar weakens

Suddenly, the dollar is back on the slide, on an inkling that Washington is ready to use more than words to reverse its longstanding overvaluation in pursuit of a global trade reset.

- Mike Dolan

But trying to prod gigantic currency markets into seismic shifts could get very messy indeed.A relatively placid start to the year for foreign exchanges, despite major geopolitical ructions, had many assume the dollar's precipitous early-year slide in 2025 had petered out. Re-accelerating US growth and its reinvigorated asset markets had drawn a line under it in many investors' eyes.

But the past week has seen Japanese authorities try to rope in US counterparts to defend the ailing yen ahead of elections next month. That revived speculation Washington could take more direct action to keep the dollar down and perhaps even reverse years of broad dollar appreciation.

Even though no official selling of dollars was detected, a "quote check" from US authorities on Friday — often seen as a prelude to intervention — sent the dollar/yen pairing plunging.

Subsequent Japanese warnings against excessive yen weakness point back to last September's joint Washington-Tokyo statement.

The dollar slide hasn't been confined to the yen. South Korea's won has rebounded, while China's yuan and Australia's dollar hit their highest in three years. The move shifted to Europe on Tuesday, with the euro soaring to its highest level in almost five years and the Swiss franc climbing to 10-year peaks.

The dollar's index against the most traded currencies — which had its worst first half of any year of the floating exchange era in 2025 — plumbed its weakest since early 2022.