US Dollar dropping and dropping

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patfert1

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The $ has been falling for the past year. 13.3% down in 12 months vs EUR. Similar against most other major currencies. Down 9.45% against GBP in past year. Down 5.16% against Yuan. Obviously the US administration is happy to let this happen, I guess that (alongside tariffs) it makes imports more expensive and thereby boosts spending on local products (though this may be flawed thinking). Boosts physical exports (if the world buys anything America makes). Also a big boost to US services companies' international revenues.

Like many others, I'm sure, I have investments in the US market, e.g. market tracker ETFs. And those have been flat enough recently too. So $ a concern in near term (probably less so long term).

I'm not looking for investment advice but rather for thoughts on where the dollar might be going and views on it as a safe haven. 3 more years of the current US admin... what levels might they be happy to let the $ drop to... what events might make the admin back a rise in the dollar... that sort of thing.

[Moderators... I found old posts on this topic, but nothing recent]
 
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Fwiw a bond dealer friend always says 1.25 is a good number to work off for a long term investor. He still says so after 25 years.
A thousand people will disagree and provide graphs and reasons but so be it !
 
@JoeRoberts Sorry I don't follow at all. You mean 1.25 a target for EUR->USD?
Anyway my question is not for specific forecasts (frankily, I rarely believe them, but that's not the point). Rather, I'm interested in thoughts on the factors at play which are causing a persistent decline in the dollar, and what might change that would cause a shift in direction.
 
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Well if you read your post again you are looking for an idea of how far it could go. I bought Usd at 1.48 in 2008 for holidays. Just be concious of the currency risk in your investment if you are heavy on US assets.

But looking at last 25 years, todays rate is roughly about average. So its not weak in my mind.
 
I think the weaker dollar is a policy decision to inflate away the 38T debt over time. Bessent harps on about commitment to a 'strong dollar policy' but I think this is to ensure the bottom doesn't just fall out and the decline is orderly tbh.

I tilted to Emerging Markets at the end of 2024 after falling out with US exceptionalism and its been buoyed by the weakening USD and commodities jump. In my view USD is in a cyclical downturn and will be for a couple of years.

Euro seems to be doing ok but there are some not so nice sovereign debt levels that could potentially cause an upset at some point. I can't see it totally surging further against USD (it's developed market cousin). I'm no expert by any means but that's my 2 cents.
 
Here is the longer run picture:

www.ecb.europa.eu

Euro exchange rates charts

The European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.
www.ecb.europa.eu www.ecb.europa.eu

The weakest USD was at €1 = $1.60.


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