• Emerging-market currencies and stocks surged as President Trump downplayed concerns about dollar weakness, boosting investor flows into higher-yielding assets.
  • The US dollar index fell to a new low of 95.551, with EUR/USD surpassing 1.2000 for the first time since June 2021, driven by Trump's positive comments.
  • Asian tech shares led the gains, with EM currencies up 0.3% and stocks jumping 1.6%, benefiting currencies like the South African rand, Brazilian real, and South Korean won.

Emerging-market assets are riding a wave of optimism after President Trump's remarks on January 27, 2026, reinforced perceptions of a deliberate policy push for dollar weakness. "I think it's great," Trump said, according to people familiar with the matter, sparking a sell-off in the US dollar that accelerated into the weekend. The dollar index broke below last year's low of 96.218, hitting 95.551 in early trading, while EUR/USD climbed above 1.2000—a level not seen in nearly five years.

Investors are interpreting Trump's stance as a signal to boost US manufacturing competitiveness, ahead of the upcoming FOMC meeting where rates are expected to hold steady. This has loosened global financial conditions, increasing demand for riskier EM assets. Efforts to reach the White House for further comment were unsuccessful, but market participants say the move is fueling capital inflows into higher-yielding markets. Without this shift, some analysts warn, EM assets might have faced pressure from a stronger dollar cycle.

Asian tech shares, in particular, have benefited, with gains outpacing broader indices. The rally is also lifting commodity-linked currencies like the Australian dollar, amid rising prices and expectations of RBA rate hikes. However, the situation remains fluid; a correction could emerge if the Fed adopts a more hawkish tone post-Powell in May, according to sources close to the discussions. For now, traders are betting on continued dollar weakness, with one investor noting, "There's lots more room for decline, given the political backing."

In the background, EM sovereign debt spreads have narrowed historically during such USD cycles, which tend to last years. This contrasts with past crises where a strong dollar forced reserve sales, highlighting how current conditions are easing pressure on emerging economies. US equities, while strong in local terms due to high profitability, are underperforming globally when adjusted for dollar depreciation, prompting some investors to adjust "Sell America" strategies for currency risk.

Looking ahead, the outlook hinges on whether Trump's rhetoric translates into sustained policy actions. Markets perceive this as growth-negative for the US, diverging dollar performance from yield spreads despite scaled-back Fed cut expectations. If the trend holds, it could sustain EM rallies short-term via easier conditions, but persistent debasement fears might boost safe-havens like gold, already over $5000/oz, and pressure central banks like the SNB. Active USD management is advised, as the cycle shows similarities to April 2025, when policy chaos drove a 6% dollar drop.

Correction: An earlier version misstated the date of Trump's comments; it was January 27, 2026.