Dollar Index Plummets, Emerging Markets Make a Comeback!

TradingKey – The weakening dollar has prompted investors to shift their focus to emerging Asian markets, though analysts warn that Trump's tariff policies could potentially strengthen the dollar again.

On Monday, February 24, the dollar index continued to decline, hitting a nearly three-month low. According to data, the dollar index fell by 0.46%, reaching 106.18 — the lowest level seen since December 10, 2024. Since January 13, the dollar index has been on a downward trajectory, cumulatively dropping by nearly 4%.

Chart of Dollar Index Movement, Source: TradingView.

The decline of the dollar index has shifted investor attention back to the stock markets of emerging economies in Asia. According to Bloomberg, global investors purchased over $700 million in stocks from developing Asian countries (excluding China) over the past five trading days.

Analysts suggest that a weaker dollar benefits emerging market currencies and provides central banks with more flexibility to cut interest rates, which in turn could promote economic growth.

However, will the dollar continue to decline? Technical analysis indicates that the dollar index may find support around the 105 level — a retracement low after a significant rise in November. This suggests that there may not be much room for further decline.

Additionally, analysts warn that President Trump could continue to implement his tariff threats, which could once again drive the dollar higher. In early February, Trump planned to impose a 25% tariff on imports from Canada and Mexico but later agreed to some tariff exemptions, easing the previously tense situation.