Market Brief: Hedge Funds Pivot Following Tariff Ruling Citigroup's hedge fund clients recently moved to sell the U.S. dollar, following a landmark Supreme Court decision on Friday, February 20, 2026. The 6-3 ruling struck down President Donald Trump’s sweeping "Liberation Day" tariffs, which had relied on the International Emergency Economic Powers Act (IEEPA). The court determined that the administration had exceeded its authority, leading to immediate volatility in foreign exchange markets. The U.S. dollar experienced downward pressure shortly after the ruling as traders unwound "long" positions—bets that the currency would rise. Hedge fund activity saw a shift into other currencies, with the Australian dollar emerging as the most bought major pair. Emerging market currencies in Asia and Latin America also recorded notable inflows. Market indicators show the U.S. dollar index softened as investors reassessed the economic trajectory. As of February 24, 2026, the dollar is trading around 90.93 against the Indian rupee, down from early February highs above 91.60. Despite this selling pressure, Citigroup notes that overall positioning remains "moderately long" on the dollar, suggesting many investors are still holding onto the currency despite the recent legal setback for trade policy. In response to the ruling, the White House has already shifted strategy. President Trump announced a new 10% global tariff on most imported goods, utilizing Section 122 authority as a 150-day stopgap. This move aims to maintain trade protection while the administration prepares more permanent investigations. The persistence of these trade barriers has kept market sentiment tentative, as the legal pathway changes but the broader trend of protectionism remains intact. Broader financial markets have seen a mixed reaction. U.S. stock indices like the S&P 500 rose 0.7% following the ruling, while gold prices surged more than $100 over two days to trade near $5,182 per ounce. This flight to safety reflects ongoing uncertainty regarding the $175 billion in potential tariff refunds the U.S. government may now owe importers. Economic data continues to influence the landscape alongside trade news. Recent figures show U.S. GDP growth for the fourth quarter slowed to 1.4%, significantly below the 2.8% estimate. Meanwhile, core inflation remains sticky at 3%, complicating the Federal Reserve’s path. Governor Christopher Waller recently indicated that while tariff effects should be viewed separately, the Fed remains prepared to support a 25-basis-point rate cut in March if the labor market shows further signs of weakening.