Dollar Slips While Fed Claims Some Responsibility Due to Rate Hikes, and North Korea Tensions Rise

Dollar
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The U.S. Dollar Continues on a Downward Spiral as the News Punishes the Buck

With the tensions with North Korea once again set to ignite (in this case quite literally as the country is expected to test more nuclear missiles), alongside U.S. Federal Reserve skepticism from speakers, the dollar has taken another fall.

The first and perhaps biggest development for the greenback is the ongoing tensions with North Korea. The nation has been locked in a heated back-and-forth with the U.S. over North Korea’s repeated display of its nuclear weaponry.

The White House, for its part, has responded in kind with harsh words for the country, with President Donald Trump claiming that North Korea would be met with “fire and fury” at a press conference in August, as well as multiple times claiming that a military option for North Korea was on the table.

The dollar often weakens in times of conflict and uncertainty. And with North Korea’s possession of nuclear weapons, this is certainly a time of uncertainty.

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Compounding on the dollar’s already weak performance of late was a meeting featuring a series of speakers at the U.S. Federal Reserve. Minneapolis Fed President Neel Kashkari said that the central bank’s recent rate hike could be one of the reasons for lower wage growth and thus lower inflation.

All the while, gold has continued to see gains, climbing on the back of a weakening dollar. Gold and the greenback usually have an inverse relationship, with investors flocking to gold in times of uncertainty, and towards the dollar when the economy is strong. At the moment, gold is the investment of choice due to signs of weakness in the economy, combined with an uncertain Fed and rising tensions that could possibly boil over into armed conflict.

 

Sources

Dollar slips further as havens pick up steam,” MarketWatch, September 5, 2017.

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