Donald Trump praises himself as the savior of the United States. “America first” is his motto. One of his approaches: a weak dollar. For the US economy, that’s great after years of dollar strength. By contrast, German companies groan.
Why is the US dollar currently so weak? That’s a question many economists are currently working on – many experts are not aware of the answer in the dark.
Last year, the US currency has plummeted. In March 2017, it was still at 95 euro cents – the highest in 13 years. Today it is worth only 80 euro cents – a minus of 15 percent. One euro costs thus almost again 1.25 US dollar. A year ago, it was only $ 1.08.
Maybe the euro is just too strong? No question, thanks to the ECB’s billions, the single currency is not cheap at the moment. But not too expensive. Carsten Brzeski, chief economist of Ing-Diba, sees above all the new strength of the Eurozone as a reason for the weak dollar: “The Eurozone surprised at the moment positively,” he says. “Many foreign investors have just woken up and are only now realizing how attractive the Eurozone is now.” Investors are increasingly assuming that the European Central Bank will soon raise interest rates and prepare to exit the bond purchase program.
For a dollar weakness speaks in addition to the comparison with a basket of currencies of the main US trading partners. Again, the dollar lost a total of ten percent since November 2016.
However, the typical factors that usually cause a weak currency are not currently beating in the US: The Fed is likely to live up to its plan and continue to raise interest rates this year and next. The reason for this is the prospect of stronger inflation. Both are actually considered a boost for a currency.
“The current record of President Trump is sobering”
But then there is US President Donald Trump – whom the markets had cheered for his election in November 2017. The dollar also increased to 95 euro cents after the election. But the euphoria soon faded: “The previous record of the government under President Trump is sobering,” says foreign exchange expert Thu Lan Nguyen in the current weekly outlook of “Commerzbank”. The high expectations of the market for the “Trumponomics” would not have been fulfilled. The weak currency can also be seen as a vote of no confidence of investors in the US government. And then Trump had also announced that eventually the strong dollar was “painful”.