US Dollar Index falls to near 97.50 as White House policy doubts linger
Oleh Akhtar Faruqui
Tarikh Diterbitkan: 26 Feb 2026 | Tarikh Diubah: 26 Feb 2026
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The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, extends its losses for the second successive session and is trading around 97.50 during the Asian hours on Thursday.
- US Dollar Index weakens amid uncertainty over White House economic policies.
- President Trump signaled no easing of tariff measures in Tuesday’s State of the Union address.
- IMF’s Kristalina Georgieva said tariff-driven inflation supports cutting rates toward 3.25%–3.50% for full employment.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, extends its losses for the second successive session and is trading around 97.50 during the Asian hours on Thursday.
The Greenback remains under pressure amid ongoing uncertainty over the White House’s economic policies. In his State of the Union address on Tuesday night, US President Donald Trump said the US economy is rebounding, defended tariffs as growth-supportive, and criticized the Supreme Court for striking down part of his tariff policy.
Trump increased the newly introduced Section 122 tariffs to 10%, despite earlier threats to raise them to 15%, after the Supreme Court struck down a series of country-specific tariffs enacted under IEEPA 10 months ago.
The US Dollar is also weighed down by remarks from International Monetary Fund Managing Director Kristalina Georgieva, which carried a cautiously dovish tone. Georgieva said US goods inflation has been partly driven by tariffs and suggested that reducing the federal funds rate toward 3.25%–3.50% would align with a return to full employment. However, she stressed that placing US public debt on a sustainable downward path will require firm fiscal action.
Still, the dollar’s downside may be limited as expectations for near-term monetary easing by the Federal Reserve (Fed) continue to diminish. Chicago Fed President Austan Goolsbee noted that inflation progress stalled last year, emphasizing that 3% inflation remains well above the Fed’s 2% target. Moreover, Boston Fed President Susan Collins added that maintaining current interest rates for some time is likely appropriate, citing a resilient labor market and persistent inflation pressures.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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