Be careful what you wish for on a weaker US dollar

SUDDENLY, the US 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. 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 that the US 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 that Washington could take more direct action to keep the US dollar down, and perhaps even reverse years of broad dollar appreciation.