That's the question analysts and investors were debating on Monday as the latest round of political comments on exchange rates - this time from German Chancellor Angela Merkel - pushed the euro to a six-and-a-half-month high.
The dollar's fall last week after the sacking of FBI chief James Comey followed a period of turbulence around French presidential elections and North Korea's missile tests.
But as this graphic shows, the dollar's steady fall this year - now almost 7 percent - correlates most closely with a rise in negative surprises from U.S. macroeconomic data. That hit its weakest in a year last week but then turned upwards - just as its euro equivalent did the opposite.
Equity analysts from JPMorgan said in a note to clients on Monday that the dollar was already 5 percent undervalued against the euro
"Controversies such as the current one have some precedent in causing the dollar to weaken more than what would be justified by typical cyclical drivers like interest rate differentials," they said.
"We do think a more protracted period of political risk is worth positioning for, but given these existing risk premia, we do so narrowly – only via shorting the dollar vs the franc."
The fall in the past week has only taken the dollar index, measuring its strength against a basket of other currencies, back into the top of the range it held for most of 2015 and 2016 - until Trump's election last November.
"(That fall) should help to dampen the scope for the U.S. dollar to weaken further in the near-term which would also require building concerns over the health of the U.S. economy," MUFG economist Lee Hardman said on Monday.
"Technically, the dollar index has fallen back to within the consolidation range. A break below the bottom of that range would be a far more significant long-term bearish technical development (and) remains unlikely in the near-term."
(Writing by Patrick Graham; Graphics by Ritvik Carvalho; Editing by Greg Mahlich)
By Ritvik Carvalho and Patrick Graham
