The greenback is seeing red

The greenback just lost some color.

Yesterday, the US dollar posted its sharpest one-day decline since April’s tariff shock, sliding to its lowest level since 2021. The move accelerated after President Trump told reporters in Iowa that he thinks the dollar is “doing great,” a remark markets took as indifference toward the currency’s weakness.

The slide in the greenback lifted other major currencies across the board. The euro and British pound rose to levels last seen in 2021, while the Swiss franc surged to its highest point in 11 years.

What does a weaker dollar mean?

• For businesses, a softer dollar can be a tailwind. A weaker currency makes US goods cheaper for overseas buyers, supporting exports, while profits earned abroad rise when converted back to US dollars. “It doesn’t sound good, but you make a hell of a lot more money with a weaker dollar than you do with a strong dollar,” Trump said last July.
• For households, the impact is less favorable. A weaker dollar lifts import prices and adds to already-sticky inflation, with the burden falling unevenly. Higher-income consumers can absorb rising costs, while lower-income households feel the squeeze, reinforcing a K-shaped dynamic where spending holds up overall but problems emerge below the surface.
• For investors, the issue is confidence. When US leaders appear relaxed about a weaker dollar, markets see less commitment to currency stability. That pushes investors to reassess the risk of holding US assets and demand higher returns to compensate. Combined with growing doubts over policy direction, debt sustainability, and the Fed’s independence, a softer dollar stance risks discouraging foreign investment.

What comes next

Some investors think this isn’t just a bad day for the buck—it’s the start of something bigger.

Cole Smead, chief executive of Smead Capital Management, told CNBC that extended periods of US market dominance have often marked turning points for the dollar. Heavy investment into US markets over the past decade, amplified by the AI boom, has left US stocks highly valued. As investors rotate toward opportunities abroad in search of better returns, those capital outflows could put sustained pressure on both the stock market and the dollar.

But Alexander Campbell, CEO of Black Snow Capital, says investors shouldn’t write the dollar off just yet. In a recent Substack post, he noted that “The fall in the dollar feels large up close, but keep in mind we are still at least 25% above where the dollar typically bottoms.” He also pointed out that even if the dollar isn’t strong, it’s still ubiquitous, and it remains the reserve currency of choice around the globe.

The dollar is still dominant in the world of finance, but anyone keeping their money in cash might be left green with envy watching other assets climb as the greenback continues to slide.—SY