Dollar on the decline: US economy struggles with a 10% loss against the euro!

Dollar on the decline: US economy struggles with a 10% loss against the euro!

The US economic situation is in focus, particularly due to the ongoing weakness of the US dollar. Since the beginning of the year, the currency has lost over 10% against the euro, negatively impacting the returns of investors invested in dollar-denominated assets. Reports from Test Agate show that this development can be attributed to various factors. The Federal Reserve has cut its key interest rates four times in recent months, which has affected investor confidence. Donald Trump's political interference in the Fed's operations has also caused uncertainty.

Another point is the high national debt in the USA, which is 124% of gross domestic product. This financial burden is not good for the stability of the dollar, which is why it is currently one of the weakest currencies in the G10. Nevertheless, there are also bright spots: the low prices for American stocks and bonds make these asset classes more attractive for investors. At the end of October, a yield difference of 1.45% was found for US bonds with a term of ten years.

The influence on the export economy

The weak dollar currency has positive consequences for American exports. A lower dollar price benefits American exports, which in turn strengthens companies' sales abroad. Historically, the dollar's development has been characterized by large fluctuations, and American exporters currently have the opportunity to benefit from the weak currency.

But the Federal Reserve's hiked interest rates pose a challenge, according to a report by the World Bank not only affect the domestic economy, but can also have serious effects on emerging countries. These interest rate hikes, which have been going on for just over a year, have already caused bond yields in these countries to rise and are influencing the way investors think. These so-called reaction effects cause financial flows to decrease and lead to a devaluation of their own currencies.

A look at the future

What happens next? Although the weakening dollar could offer short-term opportunities for cheap investments, long-term developments depend heavily on the actions of the US Federal Reserve. Sustainable investment in US securities depends on a stabilization of investor sentiment and wise monetary policy. For this reason, what is happening around interest rates and the dollar remains extremely dynamic and exciting. Anyone who senses good business could pay attention to developments and continue to take advantage of opportunities in certain niches.