Analysis-Dollar under fire again as investors reassess Trump policies, geopolitical risk

By Amanda Cooper, Dhara Ranasinghe and Samuel Indyk

LONDON, Jan 26 (Reuters) - The dollar is coming under fire again in the first few turbulent weeks of 2026 as a growing range of factors -- including Washington's desire for a weaker dollar -- prompts a rethink of investors' optimistic assumptions for a period of stability ​for the currency.

The dollar on Monday was heading for its biggest three-day slide against a basket of major currencies since last April, when U.S. President Donald ‌Trump's "Liberation Day" tariffs unleashed an almost unprecedented selloff in U.S. assets.

In his first year in office, Trump's erratic approach to trade and international diplomacy, his attacks on the Federal Reserve that undermine its independence, and huge increases in ‌public spending pushed the dollar down 10%.

The dollar is again underperforming other major currencies including the euro, sterling and Swiss franc.

WHIRLWIND RATE OF CHANGE

"There are a number of factors coming together," said Seema Shah, chief global strategist at Principal Asset Management, which manages just over $600 billion worth of assets.

"I don't think this is a 'Sell America' trade, but the fundamentals are coming together, and faster than expected."

Just this month, Trump has threatened to take control of Greenland, slap more tariffs on European allies over the matter, moved to criminally indict Fed Chair Jerome Powell, and overseen an operation ⁠to seize the president of Venezuela. On Saturday, he threatened ‌Canada with an effective trade embargo.

While he has backed down on his threats over Greenland and European tariffs, and markets have shaken off the strike on Venezuela, the backdrop is tense.

Market measures of volatility are still running hot and bond market sentiment is fragile, not least because of ‍an aggressive selloff in Japanese government debt that could spill over into Treasuries, while gold's relentless scaling of new records is a sign investors are seeking alternative safe-havens.

Trump's domestic policies, including an aggressive crackdown on illegal immigration that has killed two U.S. citizens this month and sparked protests, could prompt another government shutdown this month.

What's more, the Fed is still expected to cut interest rates at least twice this ​year, while other major central banks are pausing or could even hike rates.

This alone makes the dollar less appealing to investors, who could opt to put their money somewhere ‌where lending rates are rising.

Powell, who has resisted pressure from Trump for faster rate cuts, steps down in May. Online betting markets now attach a 50% chance to BlackRock’s Rick Rieder, an advocate of lower rates like the president, being the likely successor, up from less than 10% a week ago, adding to dollar weakness.