Interventions spooked the dollar

• Rumours of coordinated intervention caused the USD index to plummet.
• The risk of a new shutdown is putting pressure on the greenback.

The US dollar started in the last week of January with a down gap amid investor fears of coordinated currency intervention. Japan’s Deputy Finance Minister Atsushi Mimura said that the authorities would respond to speculative actions on the Forex in close cooperation with the US. In 1985, such cooperation ended in a spectacular collapse of the USD. Will we see history repeat itself?

Politics is encroaching on the economy. Donald Trump intends to use non-market methods to lower the key policy rate by replacing the Fed chair and filling the FOMC with doves. The US president has repeatedly spoken out in favour of a weaker currency, which would increase the competitiveness of American manufacturers. Tokyo’s interest in strengthening the yen to lower import prices and slow inflation is being exploited by Washington for its own purposes.

Countries are forced to respond to the uncertainty of Donald Trump’s policies and the associated slowdown in economic growth with fiscal stimulus measures. According to Apollo Global Management estimates, government support measures will accelerate GDP growth in the US and Germany by 1 percentage point in 2026 and in Japan by 0.5 percentage points. This leads to an increase in public debt. The Germans can afford this, which has a positive effect on the EURUSD.

Pressure on the US dollar has intensified due to the growing risks of another shutdown. Dissatisfied with the shootings in Minneapolis, Democrats are not going to vote for the government funding package without serious changes to the national security system. The government risks being sidelined again, which will negatively affect GDP growth. The same goes for the devastating winter storm, which could bring hardship to nearly 200 million Americans. Already, 11,900 flights have been cancelled at airports from Dallas to Boston, and about 900,000 consumers are without power.

In 2025, the US economy managed to withstand tariffs and the shutdown thanks to investments in artificial intelligence, productivity growth and the wealth effect. However, will it be resilient in 2026? If not, the US dollar risks weakening.

Gold was the main beneficiary of the fall in the USD index. Its price rose by 17% so far this year and is approaching $5,100 per ounce.

The FxPro Analyst Team