On Thursday, January 29, the US Dollar Index traded near 96.00 during the European session, showing a significantly steeper downward slope on the daily chart and an increasingly weak trend. The index had previously formed a阶段性 high around 100.3900 but subsequently fluctuated lower, failing to maintain its strength. It briefly rebounded to 99.4940 earlier this year, yet lacked upward momentum, quickly reversed course, and accelerated its decline. The key support level at 97.00 was decisively breached, with the index probing as low as 95.5660 before making a modest recovery to consolidate near the 96.00 mark; however, the overall bearish structure remains unchanged.
This round of dollar weakness is not an isolated phenomenon but a broad pattern evident across multiple major currency pairs. The euro rose 0.3% against the dollar to 1.1990, once again approaching the psychological 1.2000 barrier and trading within the week's high range. The US dollar fell sharply by 0.4% against the Swiss franc to 0.7650, continuing to test lower levels. The Australian dollar performed even more robustly, jumping 0.7% to 0.7090 against the US dollar against the backdrop of hotter-than-expected inflation data, nearing its highest point in two years.
These shifts indicate that the dollar's softness is not merely due to the strength of any single currency but is a concentrated reflection of a broad asset reallocation playing out in the foreign exchange market. Capital is moderately flowing out of dollar-denominated assets and into other currencies and asset classes with higher relative appeal. Behind this transition lies a market reassessment of the long-term pricing logic for the dollar, which cannot be explained by short-term volatility alone.
Particularly noteworthy is that the strength in precious metals has further amplified the downward pressure on the dollar. Gold surged 2.5% on the day, bringing its cumulative gain for the week to over 11%, with the latest price hovering around $5550 after nearing the $5600 mark during the session. Just last weekend, the market was debating whether $5000 would pose strong resistance, a level that has now been swiftly breached, signaling a sharp increase in demand for hedging against inflation and geopolitical uncertainty. Silver also strengthened, breaking through $120 to set a new high. Sustained rallies in precious metals typically signal either falling real interest rate expectations or rising safe-haven sentiment, both of which scenarios tend to diminish the dollar's appeal.
The current decline in the dollar appears more like a result of multiple factors resonating together rather than being triggered by a single event. Firstly, frequent changes in trade policies and tariff paths have made it difficult for the market to form stable expectations for economic growth and interest rate prospects, leading investors to reduce concentrated holdings in dollar assets. Secondly, while geopolitical uncertainties have increased risk premiums, they have not automatically translated into unilateral benefits for the dollar as in the past; instead, they are prompting capital to diversify allocations, thereby elevating the relative value of currencies like the euro and the Australian dollar.
Furthermore, discussions surrounding the independence of the Federal Reserve's monetary policy are intensifying, impacting market confidence in the medium- to long-term inflation and interest rate framework. Once a central bank's credibility is damaged, the foundation of its currency's credibility also comes under pressure. Fiscal concerns are equally不容忽视—the expanding debt burden is prompting a market reassessment of real purchasing power and term premiums. When capital demands higher compensation in both the exchange rate and interest rate dimensions, the dollar naturally faces downward pressure.
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