Strange sell-off in the dollar raises questions

Friday, April 18, 2025

Among the threats tariffs pose to the U.S. economy, none may be as strange as the sell-off in the dollar. Currencies rise and fall all the time because of inflation fears, central bank moves and other factors. But economists worry that the recent drop in the dollar is so dramatic that it reflects something more ominous as President Donald Trump tries to reshape global trade: a loss of confidence in the U.S.

Posted by LampLighter at 11:13 PM | 5 COMMENTS | permalink

Comments

More from the article ...

... The dollar's dominance in cross-border trade and as a safe haven has been nurtured by administrations of both parties for decades because it helps keep U.S. borrowing costs down and allows Washington to project power abroad " enormous advantages that could possibly disappear if faith in the U.S. was damaged.

"Global trust and reliance on the dollar was built up over a half century or more," says University of California, Berkeley, economist Barry Eichengreen. "But it can be lost in the blink of an eye."

Since mid-January, the dollar has fallen 9% against a basket of currencies, a rare and steep decline, to its lowest level in three years. ...

#1 | Posted by LampLighter at 2025-04-18 11:15 PM

A different view ...

OpEd: Trump Wants the Dollar to Be Mighty But Weak. It Makes No Sense.
www.barrons.com

... President Donald Trump's views on the role and level of the U.S. dollar recall a famous claim by the novelist F. Scott Fitzgerald. "The test of a first-rate intelligence," Fitzgerald wrote, "is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function." Assuming the president's policy hyperactivity is evidence of functioning, we are witnessing a first-rate intelligence in action.

Either that or a devastating disproof of Fitzgerald's claim.

Both Trump and Vice President JD Vance have, for some years, been outspoken in support of a weaker dollar.

They believe that depreciation will cut the U.S. trade deficit and help U.S. manufacturers and exporters.

But they have also contradicted themselves, and each other, repeatedly on matters that have a strong and enduring impact on the level of the dollar. ...

#2 | Posted by LampLighter at 2025-04-18 11:18 PM

More from the OpEd ...

... First and foremost among these contradictions is their view on the dollar's role as the dominant central-bank reserve currency and its outsize use in international trade. On Jan. 30, the president thundered a threat at the "seemingly hostile" countries that make up the BRICS group -- Brazil, Russia, India, China, and South Africa.

"They will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar," Trump warned.

But if they do, they "will face 100% Tariffs."

The irony is rich and multilayered. ...

Yup.

Irony? No.

imo, indicative of not having any sort of plan.

#3 | Posted by LampLighter at 2025-04-18 11:22 PM

What I am wondering ...

How long will the US's AAA credit rating stand?

My guess is that the Trump admin will once again put its tail between its legs and not sacrifice the validity of the dollar and that credit rating.

But, unfortunately, that is just a guess.

Possibly (unfortunately?) just hope.

#4 | Posted by LampLighter at 2025-04-19 02:26 AM

Empty Band Day looms closer than ever.

#5 | Posted by redlightrobot at 2025-04-20 02:52 PM