Economy • 11:54 • Modified at 13:05 Dollar is collapsing rapidly, just as Trump wants Author : BNR Web Editors The US dollar is getting weaker and weaker at a rapid pace. Bad news, you might think, but this is exactly what President Donald Trump wants. During his election campaign, he already showed that he is not happy with the strength of the dollar and that the currency should actually become weaker.
The year is barely four months old, and already a record seems to be about to be broken. The US currency seems to be heading for its most dramatic year since 2017.
With the unleashed trade war, which for some has been put on the back burner for a while, Donald Trump has created the effect he was desperately looking for: the weakening of the dollar. In just one week, the value of the dollar has fallen by no less than 5 percent against the euro. A euro now yields 1.14 dollars, while last week it was 1.09 dollars.
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The dollar’s ??weakening is not only being blamed on tariffs. Traders are also suggesting that China is playing a role in the decline. For example, the US 30-year bond yield suddenly rose sharply this week, the biggest increase since the coronavirus pandemic. “China may be selling its government bonds in retaliation,” said Ataru Okumura, a rate strategist at Japanese agency SMBC Nikko Securities.
For the US, the sale of government bonds by China is a big problem, as China is the second largest holder of US debt. Government bonds are a way to raise money from the market. If China sells them, it means extra pressure on the enormous debt mountain of the US, which is already under the microscope of the financial markets. As a result, the dollar is also weakening rapidly, which on Thursday recorded its biggest loss in three years.
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For Trump, however, it is positive news. He wants a weak dollar. It makes the US a more attractive place for foreign buyers. A cheaper dollar makes it cheaper for companies elsewhere in the world to import products from the US.
Dollar reserves But it also has a major disadvantage. A weak dollar is not in the interest of countries that hold dollar reserves. For years, the dollar was a stable investment to keep your local currency stable and to support your government finances. Now that the dollar is falling, the finances of countries worldwide are also in trouble.
The year is not even four months old, and already a record seems to be about to be broken. The US dollar seems to be heading for its most dramatic year since 2017. “The whole premise of the dollar as a reserve currency is being challenged by what we’ve seen since Trump was elected,” said Ray Astrill, head of currency strategy at the National Bank of Australia.
