In the News

1 big thing: Why the dollar matters

ECONOMY & BUSINESS, August 20 (AXIOS) - While the road is long, there is also agreement that the greenback is fading.

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Keep it 💯: “This pandemic has only exacerbated the long, slow, questionable, yet accurate … decline of the dollar as the dominant currency,” Tempus Inc. senior FX trader and strategist Juan Perez tells Axios.

The weak dollar trade is “becoming more pronounced by the day,” Boris Schlossberg, managing director of BK Asset Management, wrote in a recent note to clients.

“The state of political disarray is clearly weighing on the buck as the failure to produce more fiscal stimulus, the clearly partisan skirmishing over mail-in voting that threaten to undermine the credibility of the election are all taking their toll on the dollar.”

Nothing is expressing the weak dollar sentiment better than gold which is once again above $2000.”

The big picture: But a weak dollar isn’t all bad, Cambridge’s Schamotta says, as the global reserve currency status also “places an exorbitant burden on the U.S.”

“By enabling consumers, businesses and the government to spend beyond their means, the country is essentially forced into running current account deficits.”

“And by flooding markets with liquidity, the situation leads to financial instability — which keeps forcing the Fed to intervene.”

 

Reporting by Dion Rabouin, author of Markets
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