The dollar is tumbling through technical barriers across most major currency pairs after US president Donald Trump told reporters “I could have it go up or down like a yo-yo,” and that he’s not concerned about its recent decline, saying “Look at the business we’re doing. The dollar’s doing great”. “If you look at China and Japan, I used to fight like hell with them, because they always wanted to devalue,” he said, but “it’s hard to compete when they devalue”.

The president’s comments suggest that recent (rumoured) moves to support Japanese currency intervention—intended to raise the value of the yen—may be part of a concerted effort to force a depreciation in the dollar relative to its major trading counterparts. This strategy could help reduce trade imbalances over time, but risks generating extreme financial turbulence and creating distortions in other areas of the global economy.

As per usual, we would caution against extrapolating moves too far—the president could easily reverse his statements in short order, and markets could rebound. The episode is, however, reminiscent of the extreme moves that occurred in the eighties when governments last took an activist approach to managing exchange rates. Investors, businesses, and policymakers should be on high alert for non-linear moves across asset classes in the weeks and months ahead.