January 28 Market Watch: Dollar Breaks Below 96, Fed Meeting Approaches
Dollar Index Falls Below 96, Hits Three-Month Low Amid Fed Meeting Anticipation
On January 28, the dollar index dropped 0.84% to 96.219, falling below the 96 mark and hitting a three-month low. The decline is part of a broader weakening trend since early 2026, with a cumulative loss of nearly 7%. Former President Trump’s comments endorsing the dollar’s performance added further pressure. Markets are closely watching the upcoming Fed meeting, where rates are expected to remain unchanged at 3.50%–3.75%. However, attention is on Chair Powell’s stance amid political pressure and threats of a criminal investigation by the Justice Department.
Structural issues underlie the dollar’s weakness: its share in global forex reserves has fallen below 60%, while gold’s share rose to 25.94%. Trump’s tariff policies are further eroding dollar credibility, signaling a shift away from dollar dominance.
Gold held above $5,000, briefly surpassing $5,200, with central banks—including China’s—continuing to accumulate gold. Silver rose over 5%, exceeding $110/oz, though some funds halted subscriptions, suggesting overheating. Institutional views are mixed, with Citi bullish on silver and others cautious on short-term gold pressures.
U.S. stocks were mixed: tech gains lifted the Nasdaq, but healthcare stocks plunged, dragging down the Dow. Market focus includes potential Fed leadership changes and government shutdown risks. Small caps are outperforming, reflecting a rotation away from high-value tech stocks amid AI profitability concerns. Crypto, meanwhile, struggled as capital flowed into traditional safe havens like gold and silver.
The core dynamic remains a structural recalibration of dollar credibility. The Fed’s upcoming decision highlights a policy dilemma: cutting rates may spur inflation and dollar depreciation, while holding rates could harm the economy. Uncertainty prevails.
marsbit9h ago
