Traders unconvinced by strong‑dollar rhetoric as USD performance stays soft

The dollar had its worst year in nearly a decade, and traders aren’t falling for the tough talk anymore. While officials inside Donald Trump’s White House keep insisting they’re backing a “strong dollar,” the currency is still slumping. The dollar index is down another 1% since the start of 2026. That’s on top of the 9% plunge it saw in 2025, its biggest annual loss in eight years.

Goldman Sachs foreign exchange strategists said in a note to clients that:- Fundamentally, we think the recent injection of policy uncertainty will be sufficiently durable to keep the dollar from making up lost ground.”

They said investors had been expecting more support for the economy in 2026. What they got instead was a series of new tariff threats, which shook those expectations.

Traders respond to tariffs and political shifts

The real damage started last April, when Trump rolled out his “Liberation Day” tariffs. Within days, the dollar sank more than 5%. Almost a year later, it still hasn’t bounced back. Traders haven’t forgotten. And the rally some people hoped for never came.

The dollar used to be the place everyone ran to in a crisis. It was seen as a safe haven. For decades, it held the unofficial title of the world’s reserve currency, which gave the US huge advantages. That status is now being questioned.

Thierry Wizman, a strategist at Macquarie Bank, said, “If the reserve status of the USD does depend on the US role in the world — as guarantor of security and a rules-based order — then the events of the past year carry the seeds of a reallocation away from the USD, and the search for alternatives.”

This isn’t just about tariffs. It’s also about the future of US monetary policy. President Trump nominated Kevin Warsh, a former Fed governor, to take over from Jerome Powell as the next Federal Reserve chair. Warsh is known as a hawk from his days during the 2008 crisis. But the market didn’t take the bait this time.

The dollar only jumped briefly when his name came up. That bounce faded fast. Traders quickly realized that Trump doesn’t want someone who’ll hike rates. In an interview with NBC News on February 4, Trump said clearly, “If he came in and said, ‘I want to raise them’ … he would not have gotten the job, no.” He added, “We’re way high in interest,” and said there’s “not much” doubt the Fed will lower rates under Warsh.

Investors search for hedges as confidence slips

As the political noise builds, the dollar is still technically the backbone of global finance. But a growing number of traders are looking for safer bets. They’re moving to the euro, the Swiss franc, and especially to gold. And it’s not just gold. Other metals like silver, platinum, copper, and steel are all spiking too.

Gold alone surged more than 60% through 2025. It’s still up over 70% across the past year, despite some recent cooling. The broader metals rally that started last year is still rolling into early 2026.

Macquarie’s Wizman doesn’t think this trend is short-term. “We do not think that over the medium- and long term the USD ‘diversification trade’ is over,” he said. According to him, weak dollar phases triggered by geopolitical shifts and policy chaos in Washington can drag on for ten years or more.

He added, “Under the direction in which the US administration seems to want to take the US vis-a-vis the rest of the world, the USD cannot maintain its reserve currency status indefinitely.”

So even though the White House keeps repeating that it backs a “strong dollar,” no one’s buying it. Not in the charts. Not in the trades. Not in the metals rally. And definitely not on the trading floors. Traders want less talk and more stability. Until they see that, the dollar isn’t getting their vote.

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