joe00uk wrote: ↑Mon May 23, 2022 5:18 pm
...
It's been losing value this entire time. As far as reserve currency status goes, what tends to happen is that its value steadily erodes for a very long time to begin with and then it's only very late in the game that a credible alternative does emerge and overtakes its predecessor in a hurry. So far this seems to be just what's happening with the US dollar - losing value slowly but steadily, with a credible alternative yet to emerge. But it's worth paying attention whenever a new country decides to accept payment for goods and services in yuan/renminbi or euros, as happens increasingly often these days. The "credible alternative" moment comes when the incumbent reserve currency loses too much value first (as a result of its host nation's economy growing too weak), rather than happening the other way round.
I don’t know what planet you are living on, but the value of the dollar is doing just fine, thank you:
From a report of April 22, 2022:
The dollar continues to trade higher against the major currencies in what is now a 12-month rally. The dollar has appreciated by 11% against the euro since April 2021 and 12% versus the Japanese yen in just the past six weeks.
This most recent burst of dollar strength is most likely because of expectations of a more aggressive U.S. monetary policy relative to the eurozone and Japan.
The forward markets anticipate the Federal Reserve will accelerate its interest-rate normalization program with 10 additional rate hikes that will push the federal funds rate to 2.8% by year end.
In contrast, expectations are for the European Central Bank to be slower off the mark with rate hikes, pushing the policy only 25 basis points above zero by the end of the year.
Source:
https://realeconomy.rsmus.com/why-the-u ... ngthening/
From a report on April 24, 2022:
The US Dollar’s (via the DXY Index) strong run continued through the third week of April, adding another +0.62%. The DXY Index has been positive in 12 of the 16 weeks thus far in 2022, good for a +5.69% advance year-to-date. EUR/USD rates, which spent most of the first four days of the week in positive territory, ended up down by -0.11%. GBP/USD rates dropped by -1.71%, their worst weekly performance since June 2021. USD/JPY rates added +1.69%, their seventh consecutive weekly gain.
Source:
https://www.dailyfx.com/forex/fundament ... -away.html
From a report of May 20, 2022:
The US dollar to Canadian Dollar exchange rate reached an 18-month high when it surged passed 1.30 on Thursday. The USD/CAD rate is currently sitting at 1.2948 (CAD/USD 0.7722). Seesawing commodity prices and decoupling of the correlation between the Canadian dollar and oil prices has prevented the Loonie from gaining strength. But more fundamentally, with equity markets, cryptocurrencies and other riskier assets taking a thumping, the USD dollar is benefiting from large inflows as investors seek out safety.
Source:
https://www.interchangefinancial.com/ca ... forecast/
This is the third time I have had to correct somebody in this thread who claimed that the dollar was weakening. None of those claims has ever cited a source.
Perhaps you are mixing up the performance of the dollar with that of the British pound. While there has been recent good news on that front (despite effects of the war in the Ukraine), the overall trend has not been good:
The British pound has rapidly reversed some of the losses against the US dollar, surging 3% between 13 and 23 May amid robust jobs market numbers and better-than-expected retail sales data in the UK. Looking ahead, however, the soaring inflation may provide volatility for the pair.
Previously, the British currency sunk to its lowest level since June 2020 as the dollar index strengthened in response to rising US interest rates and the pound came under pressure from economic concerns in Europe. The pound has been in a downward trend against the dollar for much of the past year and has broken support to trade below the 1.25 level in the beginning of May.
Source:
https://capital.com/gbp-to-usd-forecast ... forex-pair
From a report of May 20, 2022:
Sterling has fallen almost 8% against the dollar year-to-date and hovered just below $1.25 as of Friday morning, slightly above a recent two-year low.
The Bank of England faces the unenviable task of raising interest rates in a bid to anchor inflation expectations while avoiding tipping the economy into recession, a balance that appears to be growing ever more difficult to strike. The Bank expects GDP to slump in the final three months of this year and sees a “very sharp slowdown” ahead but not a technical recession — two straight quarters of contraction.
Sam Zief, head of global FX strategy at JPMorgan Private Bank, told CNBC on Wednesday that although sterling is “awfully cheap” at the moment, investors looking to lock in recent gains on the dollar would be better off looking at euros than pounds.
Source:
https://www.cnbc.com/2022/05/20/traders ... izon.html
There are several causes for the decline of the pound, including Covid-19. One of those causes may very well have been something you minimized. Here is a headline from June 2016, when Brexit was being passed:
The value of sterling slumped to a 31-year low on currency markets and was on course for its biggest one-day loss in history as panicking investors contemplated the prospect of a vote to leave the European Union.
Results from across the country suggesting the Brexit camp was on the brink of declaring a referendum victory led to sterling reversing initial gains to leave the pound down more than 10% at $1.33, compared with $1.50 just after polling stations closed. That was the lowest since 1985. The pound was down more than 7% against the euro.
With markets braced for turmoil over the coming days, safer assets such as gold were in high demand. The precious metal, a long-time favourite investment in uncertain times, soared as much as 7% at one point.
The pound’s fall, which stunned investors, was its biggest ever one-day fall, and ranked with the reaction to the collapse of Lehman Brothers in 2008 and Britain’s exit in 1992 from the European exchange rate mechanism on Black Wednesday.
Source:
https://www.theguardian.com/business/20 ... referendum
Some have indicated that the pound may take a further hit due to a Brexit related trade war that may be under way:
The pound risks falling further in the second half of 2022 as a trade dispute with the European Union becomes more protracted.
That’s according to Bloomberg Intelligence’s Audrey Childe-Freeman, who said it’s possible for sterling to fall to $1.15 in the second half of 2022, although it’s likely to avoid a collapse to parity with the dollar.
Headwinds have already driven the pound to the lowest since the pandemic struck after a 12% drop in the past year. The currency steadied Friday around $1.2470, after sliding to $1.2156 a week ago.
“A trade war between the EU and UK is a scenario that could fuel further significant sterling downside,” wrote Childe-Freeman, BI’s chief G-10 currency strategist, adding that could lead to a test of the $1.20 level.
Source:
https://www.bloomberg.com/news/articles ... ar-bi-says
Don't mourn, organize.
-Joe Hill