I wonder what folks think about the dollar right now? pic.twitter.com/c6soHqwl76
— ๐๐ข๐ง๐๐๐จ๐ง๐ ๐๐๐๐ซ๐จ (@pineconemacro) August 3, 2020
Why the US dollar slide may be a sign of real danger this time t.co/9c5urRwx5J
— Sunchartist (@sunchartist) August 3, 2020
The unnatural calm that settled over financial markets in the wake in the Covid-19 pandemic is being disturbed by ominous signs that the US dollar is in trouble. This is not just a matter of risk-off moments or yield differentials, as some suggest. Something more fundamental is at work.
What makes the behaviour of the dollar particularly ominous is that the worldโs key currency is sliding not only against benchmarks such as gold and silver but also against many measures of value including other key currencies. A general depreciation of the worldโs leading currency is rare.
The dollar is at a two-year low against a basket of currencies and US Federal Reserve chairman Jerome Powellโs statement on July 29 that the Fed will keep monetary policy very loose, at least until the end of this year, portends further weakness.
Even if the main reserve and transaction currency is not exactly tottering, its wobbles hint at scenarios where it has to share pole position with other currencies, an unstable state in itself.
Conventional wisdom holds that the dollar will retain pole position as the paramount global currency because the euro is not in a position to offer a real challenge and China is cautious about dismantling yuan exchange controls, while the Japanese yen is not a serious contender.
Is there still a relationship between #moneysupply and #inflation? pic.twitter.com/SoeAAAy7wN
— jeroen blokland (@jsblokland) August 3, 2020
Funny how we throw around "Trillion" like it is nothing anymore. How soon will it be "Quadrillion" ?
— ๐ฎ๐๐ ๐ข๏ธ (@chigrl) August 2, 2020
Come'on guys. We can do it. Just a couple of #Trillion more and we can catch #Italy on #Debt/#GDP ratios. pic.twitter.com/AnkBC4toeV
— Lance Roberts (@LanceRoberts) August 3, 2020