- US dollar sinks to lowest in four years after Trump comments
- Euro tops $1.2, sterling at highest since 2021
- Yen gets further boost amid intervention chatter
- Focus will switch to Fed policy decision, Powell comments
SINGAPORE/LONDON, Jan 28 (Reuters) - The dollar headed for its biggest weekly fall since last April on Wednesday after President Donald Trump brushed off this month's slide, triggering even deeper losses against the euro, yen and pound ahead of the Federal Reserve policy decision.
As investors have grown increasingly nervous about their exposure to U.S. assets, other currencies and gold have shot up in the past couple of weeks.
The euro has topped $1.2 level the first time since 2021, the pound is at 4-1/2-year highs, while the yen is set for its strongest monthly performance against the dollar since last April, as speculation of joint Japanese-U.S. official intervention persists.
The dollar index , which tracks the performance of the U.S. currency against six others, was 0.22% higher at 96.114, but it remained near four-year lows, having lost nearly 2.8% since last Wednesday, its steepest weekly decline since last April's "Liberation Day" market turmoil.
Trump said on Tuesday the value of the dollar was "great", when asked whether he thought it had declined too much. Traders took his comments as a signal to intensify dollar selling.
While the president's comments were not exactly new, they came at a time when the dollar has been under pressure as traders braced for a possible coordinated currency intervention by U.S. and Japanese authorities to stabilise the yen.
"It shows there's a crisis of confidence in the U.S. dollar," said Kyle Rodda, a senior market analyst at Capital.com. "It would appear that while the Trump administration sticks with its erratic trade, foreign and economic policy, this weakness could persist."
The dollar tumbled over 9% in 2025 and has started the year on the back foot, already down about 2.3% in January as investors grappled with Trump's erratic approach to trade and international diplomacy, fears over the Federal Reserve's independence and huge increases in public spending.
Investors' focus will be on the Federal Reserve's policy decision later in the day, where the central bank is expected to stand pat in a pause that investors see lasting beyond U.S. central bank chief Jerome Powell's final meetings in March and April.
The weakness in the dollar is a boon to U.S. exporters, but is already a source of concern for other regions. Austrian central bank governor Martin Kocher told the Financial Times on Wednesday the European Central Bank may have to consider another interest-rate cut if the strength of the euro starts to affect the outlook for inflation.
This knocked the euro back by as much as 0.5% to a session low of $1.1975. The euro was last down 0.4% on the day at $1.1989, still set for a 2% gain this month.
"We are still in the heat of the moment and it is hard to consider fundamentals at a time when markets move so much on sentiment and on such short periods of time," Barclays analysts, led by Themistoklis Fiotakis, said in a note.
"Having said that, it is worth remembering that, particularly in the case of the euro/dollar, the more these moves extend, the higher the bar for further easy gains," they said.
YEN'S REPRIEVE
The frail Japanese yen got a further boost from the dollar weakness, surging over 1% to a three-month high of 152.10 per U.S. dollar on Tuesday, although the currency was 0.3% weaker at 152.64 on Wednesday.
Investors remain unconvinced about the impact of an actual intervention, especially because Prime Minister Sanae Takaichi is basing her snap election campaign on expanded stimulus measures. Japan's election is set for February 8.
The Australian dollar rose to $0.70225, its highest level since February 2023, after data showed consumer price inflation rose at a faster annual pace in the December quarter, stoking expectations of a near-term rate hike from the Reserve Bank of Australia. It was last 0.16% weaker on the day at $0.7.
Additional reporting by Ankur Banerjee in Singapore; Editing by Sam Holmes, Aidan Lewis
Source: Reuters