The Greenback Is Bleeding
The dollar is losing its grip. Markets are addicted to the narrative of devaluation. Rob Kaplan, Vice Chairman at Goldman Sachs, recently warned that the trade-off for export gains is a dangerous illusion. Speaking from the Global Macro Conference APAC, Kaplan signaled that the short-term benefits of a weaker currency are being outweighed by systemic risks. The export gain is a ghost. It haunts the balance sheets of nations relying on cheap currency to mask structural inefficiencies.
The Japanese Volatility Engine
Japan is the epicenter of the current tremor. For years, the Yen was the world’s funding currency. That era is dead. Recent volatility in Japanese rates has sent shockwaves through the APAC region. As the Bank of Japan moves toward normalization, the carry trade is unwinding with violent precision. Investors who borrowed in Yen to buy Dollars are now rushing for the exit. This isn’t just a currency fluctuation. It is a fundamental repricing of global risk. According to the latest Bloomberg currency indices, the yen’s resurgence is directly challenging the dollar’s dominance in trade settlement.
The J-Curve Illusion
Economists love the J-Curve. They argue that a weaker dollar eventually improves the trade balance. This theory assumes that volumes respond to price changes immediately. It is wrong. In reality, the cost of imported raw materials spikes long before export volumes rise. This creates an inflationary gap. Kaplan’s skepticism is rooted in this lag. If the US dollar continues its descent, the cost of servicing foreign-held debt will climb. The technical reality is that the US is now importing inflation while export markets remain sluggish due to global cooling. Data from Reuters indicates that manufacturing sentiment in the APAC region remains decoupled from currency pricing.
Visualizing the Decline
The following chart tracks the US Dollar Index (DXY) performance leading into mid-February. The trend is unmistakably bearish as the market anticipates a pivot in monetary policy and reacts to the Japanese rate spike.
US Dollar Index (DXY) Performance February 2026
Currency Performance and Yield Spreads
The divergence between the Fed and the BoJ is the only metric that matters right now. While the US debates the terminal rate, Japan is finally finding its footing. This creates a narrowing yield spread that punishes dollar bulls. The table below illustrates the shift in major currency pairs over the last fortnight.
| Currency Pair | Rate (Feb 15) | 2-Week Change | Implied Volatility |
|---|---|---|---|
| USD/JPY | 138.42 | -2.25% | 14.2% |
| EUR/USD | 1.1180 | +1.45% | 8.9% |
| GBP/USD | 1.3050 | +0.85% | 10.1% |
| AUD/USD | 0.6720 | +1.10% | 12.5% |
Rob Kaplan’s commentary at the Goldman conference was not a mere observation. It was a warning to those betting on a soft landing. The dollar’s weakness is not a tool for economic stimulus. It is a symptom of a shifting global order. As the carry trade continues to dissolve, the liquidity that once buoyed US equities is evaporating. Investors are looking at Yahoo Finance data and seeing a breakdown of the 200-day moving average. This is a technical signal that the multi-year dollar bull run is over.
The focus now shifts to the March Federal Open Market Committee meeting. Markets are pricing in a 65 percent chance of a rate hold, but the real story will be the Dot Plot. If the Fed acknowledges that the dollar’s decline is becoming unanchored, we could see a desperate attempt to talk the currency back up. Watch the 10-year Treasury yield. If it breaks below 3.8 percent before the March 18 announcement, the dollar’s floor will vanish.
