The US dollar fell on Friday to its lowest level since April 2022, while gold shot another historical maximum, which reflects a sustained change in the preference of safe refuge among many central investors and banks as the tariffs of President Donald Trump shake the global status quo.
Key data
The dollar index (DXY), which follows the dollar in front of a weighted basket of six foreign currencies, including the euro and the Japanese yen, fell up to 1.8% to 99.01 on Friday.
That extended the drop in the dollar so far this year to more than 8%, and much of the loss was concentrated after Trump’s “day of release day” advertisement last Wednesday, since the dollar has dropped 4% since last Wednesday, when DXY closed to 103,81.
The recent dollar movement occurs at a time when the United States bond and sharing market American economy.
“Normally, when great tariff increases are seen, I would have expected the dollar to rise,” said the president of the Federal Reserve of Minneapolis, Neel Kashkari, in the “Squawk Box” program of CNBC. He added: “The fact that the dollar is going down at the same time, I think, gives more credibility to the history of change in investor preferences.”
Contra
More than half (57.8%) of the 12.4 billion dollars in world foreign exchange reserves were US dollars, according to the International Monetary Fund, which consolidates the status of the dollar as a world reserve currency. While the dollar is at its lowest level in three years, it is far from reaching a historical weakness, remaining within its 2016 rank to 2021, before inflation and the Russian war in Ukraine strengthened it. The dollar is still approximately 40% above its lowest level during the great recession in 2008.
Why would Trump want a weaker dollar?
Trump made clear in his first term that he wants a weaker dollar, declaring in 2017 that “our currency is too strong and is killing us” and affirming in 2019 that it was not “excited” with the “strong dollar.” In 2017, Trump explained his belief that the strength of the dollar prevents “our companies to compete” in foreign markets, since the lowering of foreign currency means that the prices of US companies in foreign markets are less competitive, which reduces the benefit margins obtained abroad. Trump has been less communicative with his opinions about the dollar during his second term, but Treasury secretary, Scott Besent, declared in February that the Trump administration wants “that the dollar is strong”, but what “they do not want is that other countries weaken their coins to manipulate their trade.”
This article was originally published by Forbes Us.
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