The Greenback Is on Pace for One of its Worst Streaks in Over a Decade
With August about to wrap up, the U.S. dollar is once more on the back foot, registering its sixth consecutive monthly fall, the longest negative period for the currency in over 14 years.
The dollar is down by 1.3% against six developed market counterparts, according to Reuters data, and has lost nearly 10% since February.
What’s perhaps most interesting is that the dollar was supposed to grow, not wane, as a result of a pro-business Trump administration in the White House. Alongside a booming stock market and a more hawkish tone from the U.S. Federal Reserve, the greenback was projected to see gains throughout 2017.
But instead, a number of political and economic factors have stepped in and derailed the dollar’s growth, knocking it down at a rate that hasn’t been seen since well before the Great Recession.
One of the reasons that the dollar has performed so poorly is the uncertainty that we’ve had in 2017. While stock market growth has been generally steady, political events like conflicts in Syria and rising tensions with North Korea have served to derail the progress of the dollar. When tensions, especially potentially violent ones, begin to rise, investors often seek out safe-haven assets. Gold is often one of the first go-to stops for investors looking for a port in the storm, but the euro has emerged as a strong candidate for those looking to store their assets somewhere else besides the dollar.
And the eurozone has experienced strong growth in 2017, again making the euro seem more appealing than the dollar at times.
The scandals that have plagued the U.S. since the election of Donald Trump as president have also not helped strengthen the currency. Between the divides in American politics to election tampering and collusion allegations and investigations, there is simply too much going on for investors to feel confident that the dollar can maintain its strength.
The Fed has also been less than hawkish this year, preferring a softer tone on policy and choosing smaller interest rate hikes instead of the bigger moves that many expected from the central bank.
A final attack on the dollar’s value came from gold, which has seen a surge recently as the dollar continues to falter. Gold typically shares an inverse relationship with the greenback, often rising when the dollar falls, and vice versa. At this point, gold is on the way up and the dollar continues to sink, which could mean an economic correction could be in store for the future.
“US dollar on course for longest losing streak in 14 years,” Financial Times, August 29, 2017.