The US dollar saw further decline during Asian trading, with EUR/USD reaching levels not seen since September 2021 and USD/CNY hitting a low not observed since November last year. Furthermore, USD/CHF fell to its lowest point since 2011 as currencies like AUD, NZD, JPY, GBP, and CAD all strengthened against the dollar, and gold gained value.

The dollar has been consistently declining throughout the first half of 2025, marking a nearly 10% drop. This represents its worst first-half performance in approximately forty years.

US Fed Chair Appointment Speculation

The latest drop was influenced by a Wall Street Journal report suggesting Trump might expedite the appointment of a new Fed Chair to undermine Jerome Powell.

Japanese markets saw a brief reaction after comments from Akazawa opposing a US auto tariff, though this quickly subsided. Reuters noted the US allowed ethane shipment to China, which temporarily lifted risk sentiment, though unloading at Chinese ports remains unresolved.

In Japan, the 2-year JGB auction attracted strong demand, with a bid-to-cover ratio of 3.90. The average yield was 0.729%, with the lowest accepted bid at 0.735%, and a slightly widened auction tail indicating ongoing adjustments to short-term policy risk.

What we’re seeing here is a continuation of pressure building against the dollar, which is now folding under several intersecting forces. The moves overnight weren’t isolated blips, but rather an acceleration of a longer trend that’s gained conviction. The euro pushing past levels not visited since the tail end of 2021 signals more than just nostalgic technical levels at play—it reflects deeper shifts in expectations.

Structural View on the Dollar

The dollar’s nearly 10% slide across the year so far isn’t a matter of weak sentiment. It’s quantifiable. It’s been the worst performance in four decades. That sort of historic move backs up a structural view: confidence in greenback-linked assets is being unwound. Investors, particularly those active in interest-rate derivatives or currency volatility, should be thinking about where valuations stand now versus what’s being priced for the back half of the year.

The article hints at political influence potentially reshaping the Federal Reserve’s leadership structure. Should policymakers in Washington decide to install a new central bank head earlier than previously thought—perhaps favouring looser policy—bond markets and rate-sensitive options might enter a fresh phase of repricing. That’s not a theoretical tail risk anymore, it’s written into a widely-circulated journal piece with the kind of detail that prompts markets to respond.

The strengthening of gold alongside currencies like AUD and NZD isn’t coincidental. You don’t see such alignment unless capital is actively being redirected. Price action in commodities and foreign exchange suggests hedging strategies are changing to reflect decreasing confidence in relative US returns.

The Japanese commentary about auto tariffs was a brief worry, but the fast fade in reaction shows traders don’t see it steering policy in Tokyo any time soon. What’s arguably more notable was the JGB auction. Exceptional demand at the bid-to-cover of nearly four indicates continued foreign interest—or speculative positioning—despite yields being below 1%. The slight widening in the auction tail hints that while the demand is intense, it’s not indiscriminate. Market participants are beginning to ask how sustainable the status quo really is on the BoJ’s short-end control.

Meanwhile, the brief tick-up in risk sentiment following reports about US-China ethane shipments may have been a reflection of hopes for warmer trade flows. But without firm details on port activity or approvals, it’s unlikely we’ll see a lasting pivot towards higher EM commodity demand just yet.

In the coming days, we need to remain aware of positioning shifts in the short-end of the rates curve, particularly as central bank guidance globally could be forced to respond if these FX and commodity trends begin feeding into inflation assumptions. Traders in rate-sensitive products should revisit their hedging frameworks and volatility exposure across various tenors. Spreads that widened early in the year may now be compressing for reasons that aren’t just noise.

Create your live VT Markets account and start trading now.