US Dollar Forecast: DXY Plunges Below 98 as Gold Nears $5,000 on Safe-Haven Demand

Greenback Crushed as Investors Flee to Safe Havens

The U.S. Dollar Index (DXY) is getting pounded late in the session on Friday as foreign investors flee the greenback in favor of safe-haven assets. The dollar is poised to post its steepest weekly decline since June as geopolitical tensions, fueled by President Trump’s aggressive pursuit of Greenland, sparked a crisis of confidence in the currency.

At 20:47 GMT, DXY is trading 97.570, down 0.697 or -0.71%.

From Tariff Threats to Framework Deal—But Selling Won’t Stop

The selling actually began last Friday but started accelerating to the downside on Monday after President Trump, over the weekend, threatened a number of European countries with additional tariffs if they didn’t go along with his plan to obtain Greenland.

Even though Trump backed off the tariff threats and ruled out military force on Wednesday after claiming the U.S. and NATO officials had developed a “framework” for a plan, the selling pressure continued.

Foreign investors are rotating aggressively into gold and silver, pushing gold near $5,000 per ounce and silver above $100, as concerns mount about U.S. policy stability and dollar reliability.

Yen Volatility Sparks Intervention Speculation

The Japanese yen showed extreme volatility on Friday, spiking sharply from 159.20 to 157.30 per dollar during Bank of Japan Governor Kazuo Ueda’s press conference after the BOJ held rates steady. The sudden move sparked speculation that Japanese authorities conducted a “rate check” with banks—often a precursor to intervention—though traders believe direct intervention did not occur.

The yen has dropped more than 4% since Prime Minister Sanae Takaichi took office in October, pressured by fiscal concerns and a bond market selloff after she called a snap February election and promised tax cuts.

Euro and Sterling Gain Ground Against Weakening Dollar

Against major currencies, the euro traded at $1.1752, poised for a more than 1% weekly gain despite the French government surviving two no-confidence votes on Friday. Prime Minister Sebastien Lecornu invoked constitutional powers to push through the 2026 budget’s expenditure provisions. Sterling held at $1.3550, showing little reaction to unexpectedly strong UK retail sales data for December.

Technical Breakdown Opens Door to Further Losses

Technically, the DXY initially plunged after breaking 50% support at 98.307 then extended those losses through the 61.8% level at 97.814 and the December 24 swing bottom at 97.749. Closing near the low of the week opens the door to even more follow-through selling next week with potential targets at major lows of 97.462, 97.199 and 96.218.

The Long-Predicted Dollar Rout May Finally Be Here

The rout that many had predicted for last year appears to be underway in early 2026 and it could be just starting. It’s only one week, but there seems to be enough downside momentum to even challenge the lower 90s before any meaningful buying emerges.

We’re likely to see some short-covering rallies because the DXY does get oversold, but I believe that given the speed at which the market is coming off last week’s 99.492 top, traders have shifted to “sell the rally” mode.

More Information in our Economic Calendar.