Dollar Pressure Mounts as Traders Reopen Debasement Debate

Group 1 - The US dollar has weakened against most major currencies, with the yen experiencing a significant increase and gold reaching a record high, as investors speculate on potential joint intervention to support the yen [2][3] - The Bloomberg Dollar Spot Index has declined over 9% since the beginning of the previous year, influenced by concerns regarding Federal Reserve independence, expectations of interest rate cuts, a growing budget deficit, and increasing political polarization [4] - Discussions about a potential currency pact were reignited when the Federal Reserve Bank of New York reached out to financial institutions regarding the yen's exchange rate, suggesting groundwork for US support in Japanese intervention [5] Group 2 - The prospect of coordinated currency intervention between the US and Japan raises questions about the long-term value of the US dollar, while potentially aiding American exporters against competitors like China and Japan [3] - If the New York Fed participates in intervention, it could significantly amplify the yen's rally, as the Fed has unlimited dollar resources compared to Japan's dollar reserves [4] - The recent decline in the dollar's value is attributed to unpredictable US policymaking, which has unsettled financial markets and led to the most bearish pricing for the dollar since at least 2011 [2][4]