The U.S. dollar just fell to its lowest level in 4 years. Here's why.
Unlike the buoyant U.S. stock market, the dollar is sinking fast.
The value of the greenback just hit a four-year low, according to the ICE U.S. Dollar Index, the Intercontinental Exchange's measure of the currency against a basket of six other major currencies. While much of the decline has occurred over the past year, the dollar has slid more than 3% since mid-January, according to the index.
The dollar's slide impacts everything from financial markets to people's overseas vacation plans. It also makes it more expensive for American companies to import furniture, clothing and many other goods manufactured outside the U.S., adding to their costs amid the Trump administration's wide-ranging tariffs.
The dollar's decline also coincides with a host of destabilizing forces, ranging from the latest tariff threats by President Trump to another potential government shutdown this weekend, according to economists. A longer-term trend is also weighing on the currency, as investors shift out of the dollar and into hard assets such as gold, JPMorgan Chase said in a 2025 report.
The dollar's most recent leg down is due to "Trump's promotion of tariff policy and pressure on the Fed to lower the key rate," Alex Kuptsikevich, FxPro chief market analyst, told CBS News. "Over the past couple of weeks, these factors have resurfaced due to a new round of tariff threats and Trump's comments that he feels comfortable with the dollar at its current level."
The risks of a government shutdown are also rising, as Democratic lawmakers demand reforms to how immigration agencies are carrying out Mr. Trump's agenda ahead of a Saturday shutdown deadline. If that occurs, it would follow last year's historically long shutdown, which spanned 43 days, disrupting air travel and leaving thousands of workers without paychecks.
That uncertainty is prompting some investors to tread more cautiously when it comes to the dollar, said Nigel Green, CEO of financial advisory firm de Vere Group. The dollar's strength depends on "institutional stability, fiscal credibility and policy predictability," he said in an email. "Shutdown risks weaken all three pillars."
Mr. Trump's view of the dollar
During an appearance in Iowa on Jan. 27, Mr. Trump was asked if the dollar had fallen too far, according to the Wall Street Journal.
"No, I think it's great," he responded. "The value of the dollar — look at the business we're doing."
After his comments, the dollar continued its slide, dropping nearly 1%. Mr. Trump's comments fueled speculation among investors that the White House favors a weaker dollar, which can boost exporters by making American-made goods cheaper for foreign companies and consumers.
Even so, Treasury Secretary Scott Bessent said in a Jan. 28 interview on CNBC that the U.S. government is not intervening in the currency market and continues to want a "strong dollar."
To be sure, the U.S. dollar remains the world's dominant reserve currency, and it remains the most widely held currency by global central banks. About 56% of global foreign reserves were held in dollars in the third quarter of 2025, down about 1.5 percentage points from the first quarter, according to the International Monetary Fund.
Gold and the "Sell America" trade
Concerns about risks ranging from the U.S. government's heavy debts to the Trump administration's trade policies have periodically prompted global investors to pull back from U.S. markets, a move known on Wall Street as the "Sell America" trade.
That typically involves selling U.S. assets, such as the dollar and U.S. Treasury bills, in favor of safe-haven assets such as gold, which recently topped $5,500 an ounce, a record.
Turmoil surrounding the Federal Reserve is adding to investor unease, Kuptsikevich told CBS News. Mr. Trump is expected next week to name a nominee to replace Fed Chair Jerome Powell, whom the president criticized Thursday for the central bank's decision on Wednesday to hold its benchmark rate steady.
"The Fed should substantially lower interest rates, NOW!" Mr. Trump wrote on Thursday.
Rate cuts could weaken the dollar by prompting investors to shift out of U.S.-based assets such as Treasuries in search of higher returns elsewhere. A new Fed chair aligned with Mr. Trump's views could give the dollar more room to fall, experts said.
"Without adequate support from Treasury officials and the Fed, the U.S. currency could fall 7% to 8% in the coming months, returning to the lows of 2018 and 2021," Kuptsikevich said.