U.S. Treasury Secretaries use the term "strong dollar policy" not to target a specific currency value, but as a deliberately ambiguous phrase. It signals the dollar's key role in global markets and its utility in foreign policy (e.g., sanctions), while allowing for flexibility and avoiding conflict with the principle of market-determined exchange rates.
Contrary to conventional wisdom, a more dovish stance from an Emerging Market (EM) central bank might not cause sustained currency weakness. In a risk-on environment, lower policy rates can attract significant capital inflows into bonds. This demand for local assets can overwhelm the initial negative rate effect and ultimately strengthen the currency.
The U.S. Dollar's value has been driven less by conventional factors like growth expectations and more by an unconventional "risk premium." This premium reflects market reactions to policy uncertainty, such as talk of FX intervention or tariffs. This has caused the dollar to weaken far more than interest rate differentials alone would suggest, creating a significant valuation gap.