The U.S. dollar recently recorded its most significant weekly drop in a year and a half, influenced heavily by ongoing uncertainties surrounding potential tariff impositions articulated by President Donald Trump.

The Bloomberg Dollar Spot Index fell by 1.7% since last Friday's close—its most substantial weekly decline since July 2023, when the Federal Reserve concluded a phase of monetary policy tightening.

The global reserve currency continued its downward trajectory late in the trading day after President Trump indicated greater flexibility regarding tariff impositions on Chinese goods.

Despite threats directed toward key trading partners such as Canada and Mexico, no immediate executive orders have been enacted to implement specific tariffs.

President Trump has tasked the Treasury and Commerce Departments with evaluating current trade relationships, with findings expected by April 1st.

Matthew Hornbach, head of macroeconomic strategy at Morgan Stanley, noted that investors were initially cautious about selling off the dollar prior to Trump's inauguration, fearing immediate tariff actions.

However, as the second term progresses without immediate tariff measures, investors have felt increasingly free to act.

Hornbach emphasized that further uncertainty surrounding tariff implementation might lead investors to believe the dollar is overvalued and that interest rates are poised for a potential correction.