Dollar Weakness Deepens

The dollar extended its losing streak on Thursday, slipping to its weakest level since early August. The move reflects a broader market reassessment of global risk as U.S.-China trade relations deteriorate and investors seek safer, higher-yielding alternatives abroad.

Traders say sentiment turned sharply after Beijing hinted at new tariff responses to recent U.S. export restrictions on semiconductor equipment. Combined with softer U.S. manufacturing data and dovish remarks from Federal Reserve officials, the greenback’s momentum has faltered.

Macro Drivers in Focus

The decline comes amid falling U.S. Treasury yields, with the 10-year note dipping below 4.1%, as bond traders bet that the Fed may pivot toward easing in early 2026. Lower yields reduce the dollar’s carry advantage, encouraging capital flows into emerging-market currencies and the euro.

Meanwhile, weaker consumer confidence and moderating credit growth have reinforced expectations that the U.S. economy is decelerating after a period of strong expansion.

Global Market Reaction

Equities in Asia and Europe have reacted favorably to the dollar’s decline, with exporters benefiting from improved currency competitiveness. Commodity prices, particularly gold and oil, have also firmed as investors diversify away from the greenback.

Still, analysts caution that the dollar’s downward path may be uneven, given persistent geopolitical uncertainty and potential flight-to-safety demand if trade tensions escalate further.

What Lies Ahead

Market attention now shifts to next week’s U.S. inflation report and remarks from Fed Chair Jerome Powell, which could clarify the central bank’s stance on interest rates. Any signal of prolonged policy easing could extend the dollar’s slide below the key 98.0 threshold.

Forward Look:
The dollar’s weakening trend underscores a shifting global narrative—one where relative growth, yield differentials, and political stability will dictate currency performance. For investors, diversification beyond the dollar may offer new opportunities—but also new volatility.