Asian currencies and commodity markets are soaring in tandem! U.S. President Donald Trump stated he is not concerned about the recent depreciation of the U.S. dollar, triggering a sharp sell-off in the greenback. Correspondingly, an index of emerging Asian currencies surged to its highest level since last September, while the MSCI Emerging Markets Currency Index hit a record high. Simultaneously, commodities, including precious metals, rallied collectively. Gold broke through $5,200 per ounce, Brent crude oil surpassed $66 per barrel, and non-ferrous metals also mostly strengthened. The A-share non-ferrous metals sector experienced a broad-based rally, with a non-ferrous metals ETF briefly surging over 5%. A coal ETF also rose sharply by nearly 2.7%. So, how will this trend evolve?
Trump ignited the rally on local time Tuesday (January 27th) by stating he is not worried about the recent weakness in the U.S. dollar. Trump remarked that the dollar's value is evident from the state of current business, claiming it is performing "very strong." These comments immediately triggered a wave of dollar selling. The U.S. dollar index, which tracks the dollar against a basket of six major currencies, fell to a low of 95.566 during Asian trading on Wednesday, hitting its lowest level since February 2022.
As the momentum for a weaker dollar intensified, the emerging Asian currency index climbed to its highest point since last September, and the MSCI Emerging Markets Currency Index reached a historic peak. At the same time, commodity prices skyrocketed. The international gold price breached $5,200 per ounce, while the international oil price exceeded $66 per barrel.
Strategists widely believe that following the sell-off pressure on the dollar triggered by Trump's remarks, Asian currencies are poised to benefit once more. This is attributed to Trump's intense focus on Asian exports, and lower market liquidity can amplify the impact of such statements. Win Thin, Chief Economist at Bank of Nassau 1982 Ltd., noted that the Trump administration is taking a calculated risk, suggesting that a weaker dollar might be beneficial before the situation spirals out of control.
Bob Savage, Head of Market Strategy and Insights at BNY Mellon, commented that Trump's statement reflects his impromptu view that the dollar is overvalued. Overall, the pressure facing the dollar is that holders of dollar-denominated assets are seeking safe havens. The Korean won and Japanese yen have room for further volatility, with 152 yen per dollar being a critical short-term level for the yen due to active derivative trading targeting that price point. Unless the U.S. and Japanese central banks implement genuine intervention—which seems unlikely before Japan's February 8th election and subsequent Bank of Japan action—the yen's depreciation may be capped around 148.
From today's market performance, sectors and concepts such as precious metals, non-ferrous metals, the petroleum industry, the coal industry, chemical raw materials, and agricultural planting led the gains. The market appears to be speculating on a "comprehensive price increase" narrative. But is this logic fundamentally sound?
Goldman Sachs recently issued a warning, stating that base metals face headwinds as soaring prices clash with weakening demand. Trina Chen, Co-Head of Equity Research at Goldman Sachs, indicated that real producers are beginning to react negatively. Order volumes across various industries have declined by 10% to 30%, and even power grid orders are slowing. She noted that the rally has been supported by fundamentals, capital flows, and the macro environment. However, after the rapid price increases, these factors are no longer mutually supportive.
Beyond the dollar, other variables also seem to be influencing commodity prices. China International Capital Corporation (CICC) believes that weather acts as a key disruptive variable in commodity markets, causing simultaneous supply and demand adjustments in core sectors like energy, metals, and agricultural products. However, the underlying logic and primary concerns exhibit a distinct characteristic of being "in sync" but not "in tune"—each sector focuses either on temperature fluctuations or precipitation changes, with varying dimensions of concern and impact pathways.
CICC maintains its view that U.S. natural gas fundamentals will remain tight in 2026, expecting the NYMEX gas price fluctuation range during the off-season to shift upward to $4–5 per million British thermal units (MMBtu). Although Europe experienced a warm winter, natural gas inventories are at low levels, and restocking demand will support the global LNG market. Against the backdrop of significant increases in global LNG supply, CICC maintains its forecast for a downward trend in European gas price benchmarks, anticipating the off-season Dutch TTF gas price center to decline to $9–10 per MMBtu in 2026.
Precipitation is a critical variable for non-ferrous metals. Based on data back-testing, during La Niña winters, precipitation anomalies are negative in the upper reaches of China's Yangtze River and Yunnan province, leading to reduced hydroelectric power generation and subsequently raising the cost of local hydro-powered aluminum production. Cold winter weather increases energy consumption, pushing up electricity and gas prices.