The U.S. stock and bond markets were closed for Martin Luther King Jr. Day on Monday, but FX markets were open, and the dollar’s steep fall across the board reflected the relief among investors that Trump appears to be dialing down the tariff rhetoric in favor of a less belligerent approach.

The dollar index slumped 1%, its biggest decline since August. The dollar may have been primed for a fall, going by hedge fund positioning – the latest Commodity Futures Trading Commission data shows funds last week held a net long dollar position against a range of currencies worth $35 billion last week, the biggest in nine years.

The dollar had rallied around 10% since September alongside the surge in U.S. Treasury yields of more than 100 basis points, a tightening of financial conditions that hit Asian and emerging markets particularly hard. A pause or reversal should ease that squeeze.

Source: FINANCE.YAHOO