The US dollar index dropped 10% last year and 1.2% this month alone. That’s after Trump shocked the global market last spring with his “Liberty Day” tariffs, while worries about rising debt, central bank independence, and a schism among European allies weighed on the greenback recently.

“I think it’s good,” Trump said Tuesday of the devaluation of the dollar. “Look at the business we’re doing. The dollar is doing well.”

The currency later rebounded somewhat after Treasury Secretary Scott Bessent confirmed that the US has a strong dollar policy and denied rumors of an intervention to support the yen.

Former Dallas Fed president Robert Kaplan attributed the recent decline in the dollar to investors buying some tail risk protection by hedging the currency. He also noted that demand for US stocks remains high, contradicting fears of a “sell America” ​​trade.

“Yes, it’s true that a weaker dollar boosts exports,” Kaplan said told Bloomberg TV on Tuesday. “However, we have in the United States $39 trillion in debt, on the way to $40 trillion plus. And when you have that much debt, I think currency stability probably outweighs exports.

According to Peter G. Peterson FoundationThe US debt is currently at $38.57 trillion.

The US has long enjoyed the “excessive privilege” of the dollar as the world’s reserve currency. With such a built-in demand for dollar assets such as Treasury bonds, the government can borrow money at a lower rate than otherwise possible.

But Trump’s efforts to shore up the postwar world order have raised doubts about US financial dominance and the sustainability of the national debt should that advantage be lost.

However, Kaplan pointed to the overall health of the American economy and prospects for strong growth as continuing to attract investors.

“I think there are a lot of strengths in the United States in terms of innovation, a very strong year for GDP growth coming up, we believe, and a lot of positives,” he added.

Instead of running away from the US, markets are managing risk by looking for some alternative safe havens like gold, Kaplan said.

Meanwhile, Robin Brooks, a senior fellow at the Brookings Institution, argued that a falling dollar would not hurt demand for Treasury bonds. In fact, it helps, he said a Substack post on Friday.

That’s because foreign central banks, especially those in export-oriented Asian economies, have an incentive to buy Treasuries to prevent their currencies from rising against the dollar.

“For the time being, this means a falling Dollar should be good for the Treasury market,” Brooks wrote. “The weakness of the dollar stimulates new demand and – all things being equal – puts downward pressure on higher yields.”