Is the US dollar doomed?

The stars are aligning for a weaker US dollar, which would be good news for the world economy.

By
published
in Features

Container ship

A cheaper greenback would boost US exporters
(Image credit: Sami Sert)

A puzzle is "preoccupying the world's currency dealing rooms", says John Authers on Bloomberg. The global economy is beset by tariff wars and political instability, yet we are living through "unusually low foreign-exchange volatility". The US dollar has not had a weekly swing of more than 2% against other developed-market currencies for two years. The last time this happened was in the mid-1970s. A market truism is that "financial stability generates instability". This period of curious tranquillity might "portend a new long-term trend": the arrival of a weaker US dollar.

The end of the trend

The stars are aligning for a weaker dollar, agrees Louis-Vincent Gave of Gavekal Research. The Federal Reserve is back in easing mode. A US-China trade truce could stoke risk appetite and encourage investors to venture out of dollar assets. In America, the bursting of the start-up "unicorn bubble" and talk of a left-wing Democratic presidential candidate are also bearish for the greenback. A weaker dollar would be good news for the world economy. It would mean cheaper financing costs for companies in emerging markets. It would also help US exporters and boost corporate earnings.

Time to take out insurance

"De-dollarisation" is already afoot, says Rana Foroohar in the Financial Times. China is doing more business in euros and recently issued euro-denominated bonds. Deglobalisation is upon us and history shows that "asset-price collapses" in the country associated with the "old order" usually follow. "No wonder gold bugs abound." (See page 14.)

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Alex Rankine
Markets editor

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.

Latest