Is the US dollar doomed?

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

Container ship

A cheaper greenback would boost US exporters

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.)

Recommended

Why you should keep an eye on the US dollar, the most important price in the world
Currencies

Why you should keep an eye on the US dollar, the most important price in the world

The US dollar is the most important asset in the world, dictating the prices of vital commodities. Where it goes next will determine the outlook for t…
19 Apr 2023
Digital pound likely to launch this decade
Currencies

Digital pound likely to launch this decade

The Treasury and the Bank of England have launched a consultation on the introduction of a state-backed digital pound. We explain how a “Britcoin” cou…
7 Feb 2023
10 outrageous predictions for 2023
Investments

10 outrageous predictions for 2023

Dominic Frisby takes a look at ten outrageous predictions for 2023, including the forecast that the price of gold could surge as high as $3,000 over t…
14 Dec 2022
Gold or bitcoin: what will replace the US dollar?
Bitcoin & crypto

Gold or bitcoin: what will replace the US dollar?

As Russia and the West move further apart, there’s a growing need for a new global reserve currency. The US dollar could soon be replaced by gold or b…
6 Dec 2022

Most Popular

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?
Savings

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?

Two fortunate NS&I Premium Bond winners are now millionaires. Find out here if you’re one of them.
1 Jun 2023
The best one-year fixed savings accounts - June 2023
Savings

The best one-year fixed savings accounts - June 2023

You can now earn 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the latest rates available now.
2 Jun 2023
The top healthcare funds to buy
Investments

The top healthcare funds to buy

Increasingly rapid progress in drugs and healthcare technology makes these trusts top tips, says Max King.
1 Jun 2023