The US dollar weakens, gold hits a new high, and risk aversion rises. What is the market pricing in?

The US Dollar Index DXY fell 0.5% intraday to 98.32. Behind this seemingly insignificant number lies the market’s re-pricing of the global macro environment. Meanwhile, non-US currencies collectively rose—GBP, EUR, NZD, AUD all appreciated during the same period, and safe-haven assets like gold and silver surged significantly. This is not an isolated event but the result of multiple factors resonating together.

Direct Triggers for the Weakening of the US Dollar

According to the latest news, after Trump delivered a speech at the Davos Forum, the US Dollar Index dropped to an intraday low of 98.384. This timing is critical—not because economic data was poor, but because policy expectations shifted.

Specifically, the threat of tariffs by the Trump administration on Europe and other countries triggered concerns in global markets. European stocks declined sharply, with Germany’s DAX down 1.34%, France’s CAC40 down 1.78%, and the EuroStoxx 50 also down 1.78%, marking the largest declines recently. More notably, Denmark’s pension fund Akademiker Pension announced its exit from the US Treasury market, with its chief investment officer stating that the US is “basically no longer a good credit candidate.”

What does this mean? The market is reassessing US credit risk. When international investors begin to question the safety of US Treasuries, the appeal of the dollar as a reserve currency diminishes.

Performance of Non-US Currencies

This performance is quite uniform—not just one non-US currency suddenly strengthening, but the entire basket of non-US currencies rising. This generally indicates a systemic weakening of the dollar itself, rather than relative strength of a particular currency.

True Reflection of Risk Aversion

While the dollar weakens, safe-haven assets surge. Gold futures rose 1.77% to $4,676.7 per ounce, and silver futures soared, reaching a high of $95.62, an increase of over 8%. This is no coincidence.

According to analysis, the current rise in gold prices is driven by three levels:

• Policy Uncertainty: Greenland tariff disputes, Middle East tensions, unresolved Russia-Ukraine conflict—these geopolitical risks are fueling safe-haven flows.
• Monetary Policy Expectations: The market has reinforced the view that the Fed will cut rates at least twice by 2026, increasing the attractiveness of non-yielding assets like gold in a rate-cut environment.
• Central Bank Gold Purchases: China’s central bank has increased gold holdings for 14 consecutive months, and global central banks maintain high levels of gold purchases, providing long-term demand support.

Potential Impact on the Cryptocurrency Market

What does this macro backdrop mean for the crypto market?

According to analysis, a weak dollar is generally bullish for non-sovereign assets like Bitcoin. When the dollar depreciates, investors seek alternative assets to preserve purchasing power, making the narrative of Bitcoin as “digital gold” more attractive. Additionally, expectations of Fed rate cuts reduce the opportunity cost of holding non-yielding assets, which supports assets like Bitcoin.

However, it’s important to note that the current risk-averse sentiment is rising, and traditional safe-haven assets (gold, US Treasuries) are becoming more attractive. Whether Bitcoin can benefit from this depends on whether market risk appetite improves.

Summary

The 0.5% decline in the US Dollar Index reflects a market re-pricing of the global macro environment: rising policy uncertainty, increased US credit risk premiums, and ongoing rate cut expectations. The collective rise of non-US currencies and the sharp increase in gold and silver are manifestations of this re-pricing.

In the short term, as long as these policy uncertainties persist, the weak dollar environment may continue. For investors focused on the crypto market, this macro backdrop warrants close attention—generally, a weak dollar environment tends to create better upside potential for risk assets.