Emerging Markets Rally as Trump Embraces a Weaker Dollar
Emerging-market assets pushed higher after President Donald Trump played down concerns about the U.S. dollar’s recent weakness, reinforcing a “sell-the-dollar” narrative in global FX trading. Emerging-market currencies and stocks posted gains as investors leaned into the move away from the greenback.
Why emerging markets reacted first
When the dollar falls, it typically eases financial conditions for many developing economies that borrow or trade in dollars, and it can improve risk appetite for higher-yielding assets. In the latest move, an index of emerging-market currencies rose and an emerging-market stock gauge also advanced, led by Asian markets.
- EM FX gained, with moves led by currencies such as the Malaysian ringgit and South Korea’s won.
- EM equities rose as Asian chip-related names helped power the rally.
Dollar selling gets “official oxygen”
Market commentary framed Trump’s remarks as removing a potential policy backstop that sometimes appears when FX moves become abrupt. Standard Chartered’s Steven Englander said FX participants look for trends to jump on, and that perceived indifference from leadership can embolden dollar sellers to keep pushing.
Major currencies ride the wave
The weaker-dollar move supported major peers such as the euro, which traded above 1.20 for the first time since 2021 in some market coverage of the episode. Broadly, dollar indexes tracked near multi-year lows in reporting around the same period.
Fed holds rates steady amid uncertainty
The Federal Reserve paused after a recent run of cuts, keeping the federal funds rate in a 3.5% to 3.75% range, as markets looked for signals on inflation, hiring, and policy independence. Some strategists warned that a sharp enough dollar decline could eventually complicate the Fed’s path if it feeds inflation via higher import costs.
What to watch next
- Whether U.S. officials repeat or clarify the “weaker dollar is fine” message.
- How quickly hedging demand rises among international investors holding U.S. assets.
- Whether EM rallies broaden beyond Asia into Latin America and EMEA as carry-trade interest returns.
