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The dollar got dumped again on Monday, this time courtesy of Japan. Predictably, dollar weakness translated into yet another huge up day for gold and silver, while grain futures were left behind.
What happened: U.S. and Japanese authorities since late last week have conveyed a convincing threat to step in and halt a steep slide in the yen, implying a readiness to buy the Japanese currency and sell U.S. dollars. Remarks by Japanese Prime Minister Sanae Takaichi and reports that the New York Fed, acting on behalf of the Treasury, was “checking” rates in the FX market sparked a painful round of short covering that saw the yen soar and the dollar slump.
The yen came under heavy pressure last week after a collapse in long-dated Japanese government debt sent long-term yields soaring, underlining worries about the country’s massive public debt as Takaichi promises tax cuts ahead of a snap Feb. 8 election. While the yen strengthened Monday, the U.S. dollar is broadly lower, falling hard versus other major rivals.
Broad dollar weakness: The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, gapped lower on the daily chart Monday and hit a four-month low. A weaker dollar is typically seen as a positive for commodities priced in the currency, making them less expensive to users of other currencies. Strong export demand for corn and wheat was likely aided by the dollar’s 2025 weakness, with the dollar index seeing its biggest yearly fall since 2017. It also likely helped cushion the blow from China’s recently ended boycott of U.S. soybean purchases.
Much of last year’s dollar decline came in the first half of 2025. Renewed weakness has been tied to renewed tariff uncertainty, concerns about the U.S. government’s fiscal outlook and the renewed threat of a government shutdown (more on that below).
But for now, the direct beneficiaries of a sliding dollar seem to be largely precious and industrial metals. Haven-related buying saw gold surge above $5,000 an ounce for the first time ever Monday, while silver saw a double-digit percentage gain as it extended its run above the $100-an-ounce threshold.
“Gold, silver and other metals continue to power higher in response. There are a bunch of major implications here if this US dollar weakness continues,” said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, in his widely followed “Boock Report” newsletter. He highlighted the following possible reactions:
- The US starts to import inflation.
- Foreign investors either increase the level of dollar hedging against their US holdings and/or they decide to sell their US assets, like stocks and bonds.
- Commodity prices further rally.
- While big US multi-national companies and manufacturers might benefit from a weaker dollar via exports, about 40% of imports are intermediate goods that end up in the finished product (circling this back to possibility #1).
- A reduced purchasing power of the US dollar could limit US consumer spending.
- It really complicates the job of the Federal Reserve, even though some of the weakening in the dollar is in anticipation of an easy Fed after Powell leaves.
- Threatens long term interest rates and they rise in response.
Argentina will continue to suffer from warm, dry weather, says Andrew Owen of World Weather Inc. in a Monday note. “The moisture profile is highly variable with many areas in the Pampas farming region already dry or critically dry,” he wrote, with a large section of crop country set to remain drier and warmer than usual this week as well, which will continue to promote aggressive drying. The only areas set to see timely rain will be the westernmost production areas in Cordoba, Santiago del Estero, San Luis, and La Pampa, while the environment will deteriorate for coarse grains, oilseeds, and cotton in a large section of the country outside western production areas. Production potential may be reduced, particularly in the driest areas of Buenos Aires, Entre Rios, and Santa Fe, he said.
- Context: That backs up what crop scouts have been saying about likely yield loss in the areas suffering most from hot, dry weather. With little relief in prospect, overall corn and soybean conditions are likely to further deteriorate.
President Trump visits Iowa on Tuesday. Speculation is running high for a biofuels-related announcement after farm groups were angered last week over the failure of lawmakers to include year-round E15 approval in funding legislation. Ahead of Trump’s visit, the Clean Fuels Alliance urged the president to release proposed rules for the 45Z Clean Fuels Production tax credit. The call comes after the Office of Management and Budget completed a review of the proposed rules. “Our progress is threatened by delays in policy decisions that should have been made by the preceding administration. We anticipate that you will quickly finalize these policies and secure your promise as the most pro-biofuel president in history,” the group said in a letter to the president.
One of China’s top generals was purged. The fate of Gen. Zhang Youxia captivated China watchers over the weekend. On Monday, the Wall Street Journal reported he is accused of leaking nuclear-weapons data to the U.S. and accepting bribes for promotions. It’s the latest stunning chapter in Chinese leader Xi Jinping’s “anticorruption” drive that amounts to what the newspaper described as an aggressive dismantling of China’s military leadership, affecting over 50 senior military officers and defense-industry executives.
- It’s worth watching because “China’s ongoing corruption purge is markets negative, lowering China stability/investability and increasing geopolitical risks including Taiwan,” said Terry Haines, analyst at Pangaea Policy, in a LinkedIn post
The probability of a government shutdown soared on betting markets. A “yes” contract on the question of whether the U.S. government will shut down on Saturday surged to 81 cents, reflecting an 81% probability, on Polymarket after Senate Democrats demanded major changes to a spending bill following last weekend’s deadly shooting by federal immigration agents in Minneapolis. That’s up from less than 10% on Friday. Senate Democrats have vowed to oppose a funding package that includes appropriations for the Department of Homeland Security.
Supreme Court tariff decision may not arrive until February. That’s according to SCOTUSblog, which noted that the court had not yet indicated when it would next release opinions. If the court follows its typical pattern, the earliest the next opinion day may be Friday, Feb. 20, the site said.
- Don’t read too much into the wait. Traders were disappointed after several decision days came and went this month without a ruling on whether the president overstepped his constitutional bounds in using the International Emergency Economic Powers Act (IEEPA) to impose “reciprocal” tariffs on trading partners. The high court heard arguments in the case in November. Resist the temptation to read much into the timing one way or the other, legal experts told TPM last week. “Oftentimes, the Court can hear arguments on a case in October or November and not issue a decision until May or June or even early July,” said Eric Berger, a constitutional law professor at the University of Nebraska-Lincoln College of Law. “So, ordinarily, this would not be considered a delay.”
China is speeding up support for its beef and dairy sectors, Reuters reported, with a readout from the country’s agriculture ministry vowing to stabilize production capacity. The readout said government policies have helped the nation’s beef-cattle industry return to profit while narrowing losses in the dairy cattle sector, while stabilizing production remains a tough task.
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