The US Dollar Index falls below 99, Powell's investigation triggers a global asset revaluation

The US Dollar Index fell 0.27% on January 12, closing at 98.862. Behind this seemingly moderate decline lies deep market concerns. The immediate trigger for this round of dollar weakness was a sensational news: the U.S. Department of Justice issued a subpoena to the Federal Reserve, launching a criminal investigation into Fed Chair Powell. This event instantly changed market sentiment, pushing gold prices to a new high of $4,628 per ounce, while US stock futures declined accordingly, and global assets entered a rapid re-pricing mode.

Short-term Impact: Policy Uncertainty Disrupts Market Expectations

Market interpretation of Powell investigation

The focus of the Department of Justice’s subpoena centers on Powell’s June 2025 congressional testimony, involving the budget and related explanations for the Federal Reserve headquarters renovation project. On the surface, this appears to be a technical investigation, but market reactions far exceeded procedural concerns. The key issue is the sensitivity of the timing: Powell’s term will end in 2026, and the market is currently highly sensitive to the “future interest rate path.”

This “institutional uncertainty” directly impacts confidence in the Fed’s independence. Investors are beginning to reassess: what happens if monetary policy decisions shift from “data-driven” to “politically driven”?

Market chain reaction

The decline of the US Dollar Index expanded to over 0.50% in the following hours, reaching 98.68. Meanwhile, several asset classes showed typical safe-haven pricing:

This “synchronous reaction” is not emotional volatility but rational pricing of uncertainty. What markets fear most is not high interest rates but not knowing what determines them.

Long-term Context: Dollar Depreciation Has Become a Trend

Accelerating de-dollarization process

Focusing only on the short-term Powell event risks overlooking a larger background: the long-term downward trend of the dollar has already taken shape.

According to the latest data, the dollar index fell 9% in 2025, marking the worst annual performance in the past 8 years. Correspondingly, gold surged: in 2025, gold prices rose 65%, the largest annual increase since 1979. This is not just simple price fluctuation but a systemic adjustment in global asset allocation.

Signals from central bank gold holdings

More indicative is the change in central bank behavior. Over the past decade, the dollar’s share in global foreign exchange reserves declined by 18 percentage points, from 58% to a historic low of 40%. During the same period, gold’s share increased by 12 percentage points, reaching 28%, surpassing the combined total of euro, yen, and pound.

What does this mean? Central banks are actively “de-dollarizing” with concrete actions. They are reducing reliance on the dollar while aggressively accumulating gold. This is a silent but clear vote against the long-term credibility of the dollar.

Details of exchange rate changes

From specific data in the news, the dollar has depreciated against multiple major currencies:

• Euro against USD rose from 1.1635 to 1.1672
• Pound against USD rose from 1.3407 to 1.3466
• Yen strengthened (USD depreciated from 157.88 to 158.14 yen per dollar)

This synchronized depreciation across multiple currencies indicates that the root cause is not the strength of a rival currency but the relative weakening of the dollar itself.

Impact on the Cryptocurrency Market

Shift in risk appetite

The combination of dollar weakness and policy uncertainty is driving a reallocation of global funds. As the dollar’s depreciation expectations grow, investors tend to seek alternative assets. This provides substantial support for non-sovereign assets like Bitcoin, Ethereum, and other cryptocurrencies.

According to related reports, in this market reaction, BTC and ETH moved upward together, with mainstream coins gaining favor among investors. This is not accidental but a natural result of macroeconomic changes.

Liquidity spillover effects

After gold prices hit new highs, capital began to differentiate. While large investment funds still favor US Treasuries and US stocks, the high valuation of gold is prompting some funds to flow into other risk assets. This “spillover” liquidity is feeding into the crypto market.

Summary

The recent decline of the US Dollar Index is not an isolated event but the result of multiple factors working together: in the short term, the Powell investigation broke the assumption of Fed independence; in the long term, de-dollarization has become a common choice among global central banks.

When dollar credibility is questioned, gold hits new highs, and central banks reduce dollar holdings, cryptocurrencies—being non-sovereign and non-traditional financial assets—are becoming increasingly attractive. Moving forward, two aspects warrant close attention: first, how the developments of the Powell incident influence the Fed’s policy framework; second, whether this dollar depreciation will evolve into a larger-scale asset reallocation. In this changing landscape, the traditional “dollar supremacy” logic is being challenged.