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Forex

The current Dollar Debasement Trade is not the Sell America Trade

ADMIN || 28th January 2026

The dollar fell to fresh session lows overnight on comments from President Donald Trump, saying he isn’t concerned about the decline in the greenback. Trump even went as far as to say the dollar is doing great. The Bloomberg Dollar Spot Index is down more than 2.3% this month.

The dollar has been on the back foot for over a week now, under pressure as Greenland tensions abated while speculation of a USD/JPY rate check last week has only accelerated the selling into this week.

To add to the sense of how historic today’s FX moves are, the Bloomberg Dollar Index has only seen such a steep drop or larger in 54 other sessions since its inception in 2005. That accounts for about 1% of the time.

Notable size and scopes from today’s session based on the past year’s moves:

  1. BBDXY’s 1.05% drop marks a nearly three-standard deviation move

  2. Euro’s 1.4% rally marks a nearly 3-sigma move

  3. Yen’s 1.2% jump, loonie’s 1% advance mark 2-sigma moves

  4. Gold’s 3.3% surge is a 3.4-sigma move

  5. Silver’s 8.4% spike is a 4.4-sigma move

The volatility ramping up across conventional currencies is playing in the favor of precious metals and highlights why that trade has legs despite overstretched conditions. Today’s move in the dollar may look overdone considering rate differentials remain in its favor against many peers. But for now, markets are only focussed on risks to dollar.

At the same time, US stocks jumped overnight to a new all-time closing high on the day, hence this isn’t anything resembling “Sell America.” Rather, with robust US growth helping to steepen the Treasuries curve and underpin equities, this trading pattern fits better within a “Debasement Trade” narrative. That involves concerns that Donald Trump will pressure the Federal Reserve into easier policy, supporting US stocks, driving long-dates yields higher and hurting the dollar.

 

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