US Dollar Plunges: Biggest Weekly Drop of the Year Amid Trump Policy Uncertainty

• The US Dollar Index recorded its largest weekly decline of the year and biggest drop since June 2025, hitting a nearly three-week low.
• Investor fear grew due to changing Trump administration policies, including tariff threats against Europe followed by a sudden reversal.
• Unusually, the dollar fell despite rising US Treasury yields, indicating political risk is outweighing monetary policy.
• Options traders are now paying high premiums to hedge against further dollar declines, a reversal from previous bullish sentiment.
• Increased volatility ahead of the Fed meeting and strong US job data failing to boost the dollar further highlight market uncertainty.

Why It Matters: The US dollar experienced its biggest annual drop, driven by Trump's unpredictable policies and market uncertainty.