The US dollar exchange rate hit the biggest one-day drop in a year
On January 20, in the New York foreign exchange market, the US dollar index, which measures the US dollar against six major currencies, fell all the way from the relative high at the opening and finally closed at 108.44, with an intraday drop of 1.19%, hitting the biggest one-day drop in a year.
In this regard, analysts at OCBC Bank of Singapore said that the sharp drop of the US dollar on January 20 was the result of the combined effect of multiple factors, including US political dynamics, changes in the global economic situation, and changes in market sentiment. These factors jointly led to a sharp drop in the US dollar exchange rate. On the same day, the new US President Trump was officially sworn in as the 47th President of the United States at the inauguration ceremony held in Washington, DC. The market generally believes that Trump’s coming to power will bring a series of policy changes, including possible trade protectionist measures and tariff adjustments, and the uncertainty of these policies has exacerbated the volatility of the US dollar.
In addition to political factors, changes in the global economic situation have also had an important impact on the US dollar exchange rate. Recently, economic data from many major economies in the world have shown a positive trend, resulting in the stabilization and recovery of non-US currencies against this background, which has put certain pressure on the US dollar. In addition, from a technical perspective, the US dollar index has recently reached a high level and there is a certain correction pressure. As market sentiment fluctuates, the downward trend of the US dollar has intensified.
Looking ahead to the future market, analysts generally believe that the US dollar may continue to fall in the short term. Considering that the recent cooling of US inflation may continue to support the Fed’s interest rate cuts, at the beginning of 2025, if the Fed cuts interest rates again, it is possible to drive the US dollar further down from the current level. However, many analysis agencies such as JPMorgan Chase and Citigroup have also paid attention to the impact of Trump’s tariff policy on the US dollar exchange rate. They pointed out that this will bring more uncertainty to the US financial market, the US inflation level and the pace of the Fed’s interest rate cuts. Trump’s tariff policy is generally believed by the market to increase domestic inflationary pressure in the United States. Analysts at OCBC Bank in Singapore also said that if the tariff policy is announced quickly, it may boost the US dollar.