The US dollar looks set to become a lot weaker

Elizabeth Warren &copy; Sean Rayford/Getty Images — Elizabeth Warren: bad news for the dollar

"Amid the noise and division of 2019," the world's "single most important" price has remained remarkably stable, writes John Authers on Bloomberg. The US dollar is almost "exactly where it was when Donald Trump was elected president" and has been riding high relative to other currencies since 2015.

The dollar is the dominant currency in international trade and finance, note Eva Szalay and Colby Smith in the Financial Times. The price of the dollar is "the key driver for monetary policy elsewhere, particularly in emerging markets" (see page 5). A strong dollar means tighter monetary policy worldwide.

That is why many in the US and abroad would welcome a weaker dollar, says Authers. It would make US exports more competitive globally a cherished goal of the Trump administration. In emerging markets, companies that have borrowed in dollars, but have to repay the loans from revenue earned in local currency, would find their debt loads easier to service.

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There are plenty of reasons to think this period of dollar strength could indeed come to an end, says Will Denyer of Gavekal Research. Blockages in the overnight "repo" market have prompted the Federal Reserve to restart money printing at a faster pace than central bankers in Europe or Japan, though they don't want to call it "quantitative easing". The Fed is also easing interest rates, reducing the appeal of dollar-denominated assets.

Finally, the rising odds on a left-wing Democratic presidential candidate Elizabeth Warren is emerging as a frontrunner is also bearish for the dollar. More regulation would eat away at America's competitiveness and hence the appeal of its currency. Currency markets are unpredictable beasts, but on current trends "the US dollar looks set for a pronounced weakening".

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.