Currency’s dramatic slide will hit overseas exporters and raise pressure on central banks to cut interest rates
By Chelsey Dulaney and Alistair MacDonald of The WSJ. After the excerpts, I have some graphs on how the dollar has been doing historically since 1973 and a list of related posts on how the dollar has been doing in the last few years.
One post from 2023 was "Dollar’s Resurgence Is a Headache for the Rest of the World." Here it is about how the dollar getting weaker is hurting the rest of the world.
Excerpts:
"The U.S. currency resumed its rapid weakening Wednesday, hitting fresh lows against the euro, the Japanese yen and the Swiss franc. The dollar decline has been historic, with the ICE U.S. Dollar Index, a measure of the greenback against a basket of currencies, slipping 8% this year, the worst start to a year in the index’s four-decade trading history."
"A weak dollar makes the profits that foreign companies earn from their U.S. divisions worth less when translated back into euros or yen. It also makes the goods they produce more expensive for American consumers."
"The decline in the dollar has come as a surprise to many. Economic textbooks teach that foreign currencies tend to weaken when economies are hit with tariffs, helping to make goods cheaper to offset the cost of the levies.
Instead, investors have reacted to Trump’s back-and-forth trade policies by dumping U.S. assets, unwinding huge bets they made in recent years on the idea that the U.S. would economically outshine the rest of the world. As investors sell U.S. dollar assets, they recycle them into home currencies, pushing up their value."
"The White House has sent mixed signals about its dollar preferences, but some of Trump’s economic advisers have signaled they want a weaker U.S. currency. Trump has in the past argued that the dollar’s strength has made American manufacturers uncompetitive and fueled the trade deficits that he wants to erase with tariffs."
To see how the dollar has been doing historically go to Trade Weighted U.S. Dollar Index from The St. Louis Fed. It only goes up through 2020, so I have another graph after this one. It looks like the last point is at about 91. So the dollar was worth about 9% less in 2020 than in 1973. It is an index like the CPI and in March 1973 it was at 100.
Since this one is discontinued, the suggested substitute is Nominal Advanced Foreign Economies U.S. Dollar Index. This one was at 113 on April 13, 2020. It has had its ups and downs since then but it was back down to 113 last Friday. It was at 109 on Jan. 2, 2020. So about about 3.6% since then. That means that since March 1973, the dollar is down about 6%.
Related posts:
Why Is The Dollar Down 5.6% This Year? (2017)
Why Did The Value Of The Dollar Rise More Than 20% From July 2014 To March 2015? (2017)
The weakening dollar is having rippling effects around the world (2017)
Higher U.S. interest rates recently helped fuel a surprise rally in the dollar (2018)
Dollar’s Resurgence Is a Headache for the Rest of the World (2023)
The Yen has lost 7% of it's versus the dollar so far this year; hits 34 year low (4-6-2024)