The U.S. Dollar Could Be In A Decade-Long Decline
The dollar fell to a key area against the euro Tuesday, as part of a downtrend that has been in place since March. Strategists say the dollar could be in a long term trend that is driven by the Fed’s easy policies and it could continue to be in a bear market for a decade. Fed Chairman Jerome Powell’s announcement that the Fed will not automatically tighten policy, or raise rates, when inflation begins to rise above its 2% target reconfirmed that U.S. rates will be super low for a long period, a negative for the dollar.
The dollar has entered a downward cycle it may not crawl out of for a decade.
The dollar has been weakening since spiking in March, and strategists say its downward slide was reinforced last week when Fed Chairman Jerome Powell announced a new policy of average interest rate targeting. That policy would allow the Fed to keep interest rates at zero, even if inflation temporarily rises above its 2% target.
Low rates can mean a weaker dollar, and that’s generally viewed as a positive for exporters, who see the benefits of more competitive pricing for their products. It’s also considered a positive for the stock market, since so many companies have foreign revenues, but it can be a double-edged sword if it weakens too much, making commodities and imports pricier.
– CNBC