The dollar is doing something it hasn’t done since 1987

The greenback is getting walloped.

The dollar index is on pace for its worst January since 1987, down 3 percent and going through several wild price swings.

With the dollar index trading below the 90 mark, near levels last seen in 2014, we've had several conflicting political messages and economic data that have really launched a two-sided trading affair that I'm watching closely here.

Treasury Secretary Steve Mnuchin commented last week that he is not too concerned about a weak U.S. dollar, then said one day later that a stronger dollar is in the best interest of the country.

President Donald Trump, meanwhile, reiterated that he ultimately wants to see a stronger dollar relative to foreign currencies.

At the same time, economic data for the first quarter of 2018 should reflect strong quarter-over-quarter growth, which should theoretically boost the value of the dollar.

The long-term picture

While a 3 percent decline since the beginning of the year doesn't sound all that bad, the bigger picture speaks to the true weakness we have seen for the greenback.

The dollar index has tumbled 11 percent in the course of the last year and has played a part in boosting commodities across the board like palladium and lumber.

A bullish catalyst coming?

This week, we kick off the first Federal Reserve meeting of the year. While the odds of an interest rate hike are low, most analysts see three rate hikes this year, with the first expected in March. As rising rates tend to strengthen the dollar's relative value, we may be about to see some strength return.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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