Entering text into the input field will update the search result below

The U.S. Dollar Continues To Decline: What's Going On

Jun. 10, 2020 11:25 AM ETUDN, USDU, UUP42 Comments
John M. Mason profile picture
John M. Mason


  • The value of the US dollar continues to fall and there is a growing feeling that it will decline much further in the near future.
  • The one major thing that seems to have changed is political sentiment as concern has risen that the Federal Reserve cannot carry the full burden of the federal government.
  • A substantial decline in the value of the dollar will not help the US to finance its huge fiscal deficits or to get the economy growing more rapidly.

Wednesday morning, June 10, 2020, the value of the US dollar continues to decline.

Around the opening on Wednesday, the US Dollar Index (DXY) was around 96.10 and one Euro could be purchased for $1.1385.

About one month ago, on May 15, the US Dollar Index stood at 100.40 and one Euro cost only $1.0898.

The dollar declined about 4.2 percent in value during this time period.

My views on the possibility of a decline in the value of the US dollar were presented in two posts, the first one was presented on June 2, 2020 and the second one was posted a day later.

My concern was with the growing separation of the United States from its primary allies. I wrote,

The one thing that only a few commentators have written about is that a change has occurred in political sentiment.

And I quoted Steven Erlanger from the New York Times.

With American cities burning and the coronavirus still raging, killing more people than in any other country, President Trump also has growing problems overseas. He has never before been so isolated and ignored, even mocked.

Growing Overseas Concern

In recent weeks this concern has grown.

Notice the comments by Stephen Roach in Bloomberg Opinion titled “A Crash in the Dollar is Coming.”

Mr. Roach states that the value of the US dollar has remained strong because of the “typical safe-haven demand” that the United States has benefited from.

I have reported constantly over the past year or so about how risk-averse foreign money has been attracted to the United States as a safe haven for the funds. One of the reasons for this flow has been that the United States dollar has been the reserve currency of the world.

A second reason for the continued trust in the

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (42)

TheLongerView profile picture
Excellent, thoughtful article as always. One additional thought to add fuel to the fire: The United States continues to use the global financial exchange system (mainly denominated in dollars since the dollar is the world's reserve currency) to punish "bad actors" such as Iran, Venezuela, Russia, etc in order to try to change their political behavior. So, naturally, these countries are looking for alternative trading mechanisms that avoid the U.S. dollar. China is the biggest cheerleader for the world to shift to a "global basket of currencies" (including the yuan of course) to replace the U.S. dollar as the global reserve currency. So, if investors are already starting to have qualms about investing in U.S. dollars now, imagine what lies ahead when the U.S. loses its reserve currency status. In addition, the United States is a rare bird for a developed nation in that foreigners still hold a considerable portion of U.S. debt. This does not paint a pretty picture...
terryongarland profile picture
The author has a political bias..ya think. Sorry, but this dollar decline is not a bad thing as it goes, and to blame in on the President is insulting to all of us that believe in critical thinking.
We all know that people go to sites and articles that confirm their own bias..that does not make it on point. Maybe the author has suffered losses from his premise..and saying contentious nonsense to get eyes on.. and just maybe the dollar decline is a response to anarchy and that is concern, and should I take his arguments as fact..when it is opinion .
Salmo trutta profile picture
If there is a shortage of $s, then why is the $’s exchange rate declining?

The $ started dropping when the FED increased foreign liquidity swaps:

“To improve the swap lines’ effectiveness in providing U.S. dollar funding, these central banks have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 23, 2020, and will continue at least through the end of April. The central banks also will continue to hold weekly 84-day maturity operations.”

If the FED tries to target N-gDp (which they always have but just can’t forecast), then it shouldn’t be subverting its policy abroad.
depsee profile picture
I'm sure the massive national debt isn't helping matters, but just some thoughts:
The United Stated has always been seen as a rock solid, steady, you know what you get country. A unique Constitution and Bill of Rights, world leading justice system where all are equal. Rock solid capitalist based economy. Smooth transition of power after elections. And much more. All these assumptions have crumbled over recent time.

Hilary and others blatant crimes went unpunished. Equal justice under the law? Some of us have always known that there is a two tier legal system in America, but now its thrown out there for the whole world to see. Very Banana Republic.Then you have the Obama Administration using the FBI, CIA, and Foreign assets to spy on a political campaign which continued into the Presidency. Then, the whole Democratic party, using known lies, tried to take down the President. Millions of tax payer dollars wasted on Russian collusion and quip pro "JOE" lies. The world sees this a a coup attempt. And the guilty go unpunished. Rock solid government?
Then there is the disastrous Covid 19 event. Peoples rights taken away. Random mayors and governors stomping on the Constitution. The very unconstitutional banning of religious gatherings. So that leaves the world wondering if the Constitution is worth the paper its written on. Also there is the big Socialist movement going on despite all the failed attempts at Socialism throughout the world. A attack on the very foundation that has made America great.

So if I were a outsider looking at all these things, I would have to say I would loose confidence in the U.S. dollar.
The country is being overrun by Bolsheviks. Are the US people really this stupid? I've seen a few academics stand up and denounce this, but very few have the courage right now. The country is on its knees - literally. And is the laughing stock of the world. The least racist country in the world is now suddenly the most racist country :D I mean, Stalin would be proud of this immense distortion of the truth, and the people so willing to accept the lie. This is clearly an effort to gain power, and that's why you see the sell off. The rest of the world is not as stupid as Americans. 1925 bankers didn't keep their money in rubles, and the 2020 world businessmen are not going to keep their money in dollars. Have you lost your minds? :D
"He has never before been so isolated and ignored, even mocked." Trump is just getting his comeuppance. What’s good for the goose is good for the gander.
Dollar weakness is not political, it is due to stimulus infinity, QE infinity, and debt infinity.
The US dollar has been destined for decline because of bad governance and official corruption over a thirty year period. Trump really has nothing to do with it. Other Presidents might have bought more time, but only by selling out the country even further.

Outside of economics, you simply can't have a strong currency in a country that is essentially in a cold Civil war with itself. Protests and virus politics is just signs that citizens will no longer unify. Situation will only get more violent after each election.
Aquarama profile picture
Can I hide in Japanese equities? I just have a feeling that their industrial company or better managed.
Singapore Dollar is looking good. Sound economy. Politicians that are very intelligent. Democracy. Low business taxes.
@John M. Mason

Hong Kong is letting the Yuan slide, that has something to do with it. Europe finally got a stimulus package going in the same decade as the crisis it is responding to.

I can not be any clearer on this, the currency wars are on.

After that then you can look at the unending stimulus and all those reasons for the dollar to be devalued. I don't know if it is Trump, Powell, or some whisper out there calling the shots, but someone has thier head fully implanted in thier arse. We didn't see much of any inflation after 2008, but we didn't have the same stimulus either. I think this time the inflation is coming.
Fred Willard worked til the end.
Just maybe the lock down for several months with the fear, deaths, despair that caused a lot of restrictions on everyone increased frustration, tensions that helped fuel the hostility, protests, riots.

As to Germany, from one who lived and worked in Poland during most of the 90s, I wonder why we still have 34000 troops there and haven't moved some farther East. Germany's unhappiness is partially fueled by losing revenue.
Because the base is used for medical purposes. And Germany has some of the world's greatest surgeons.
The combination of massive US deficits and the Fed buying everything is what is behind the current decline in the dollar, not the feeling that other leaders dislike our policies.
The worry is obvious and real;I.e. that the Fed us creating a stagflation in the US or even worse.
A 50% correction lower for the dollar is just what's needed to set the stage for decades of future prosperity. With a trade surplus we will be able to resume building savings and wealth.
It would be if it had a reputable political system. But it doesn't. They have leaders bending a knee to a Bolshevik army.
What's going on???....
US DOLLAR has dropped 14.3% in its value since Feb, just 3.5 months ..
M2(Feb)=15508.3 billion
M2(May 25) = 18115.1 billion ..
M2 has increased by 16.8% in the same period.
Big moneys are looking for doors to escape, this is movement behind the stock market ..

Trump wanted a weaker dollar and negative rates. Be careful what you wish fer.
Salmo trutta profile picture
Stephen Roach, re: “And what terms — namely interest rates — will that funding now require?”

If you look at Daily Treasury Yield Curve Rates you will notice that any blip in rates results in a decline in stocks.

And the decline in the $’s exchange rate began when the FED initiated an all-out assault on the economic contraction.

“The caveat to this change is if your customers are allowed to exceed the transaction limitation, these account balances must be reclassified to transaction accounts when submitting the FR 2900 report.” So, we will know to what extent savings are utilized.

“M1 at percent change at seasonally adjusted annual rates, Thirteen weeks ending May 25, 2020 from thirteen weeks ending Feb 24, 2020 or a phenomenal 67.2 percent.
Sorry to play the political theme, but we have elected a monkey with a sledge hammer to the presidency, and all he knows how to do is wreck things. I hope to God that voters, even "conservative" (what ever that means these days) voters, recognize that a president who initiated a 1.5 trillion dollar tax cut for the very wealthy and corporations, solely to bolster his re-election prospects, is hardly a good shepherd of our country's future. Or the stability of our currency.
Please find a real monkey to elect, Joe isn't it
Monkeys are good at stock picking.
Eating bananas is racist.
I don't believe the "lack of confidence" perspective is accurate, rather America is no longer willing to be the world's sugar daddy as a price for cooperation with so called allies.
Kenmare profile picture
Dream on. I’m living in France these days and the French view America now with a combination of pity and embarrassment rather like when the esteemed old paterfamilias has gone senile and agressive and is no longer spoken of in polite company. There is no Schadenfreude, only sorrow. Europeans expect nothing positive from America for another generation now.
So true, I find it hard to believe so many people in the USA have such a narrow world understanding, often driven by religious dogma or total isolation. Too often in discussion with people (many loving our monkey) don't understand what was done, what could have been done (TPP) or how it affects economics let alone security. I think there are too many conspiracy theory web sites with unchecked BS that too many people believe.
The US has many problems , all of which have their genesis in policies followed for years.
Educated Americans look upon France as a country with great food and traditions but also one with government policies which can be referred to as disastrous . Its economic regulations are the most restrictive among developed countries and its immigration policies have transformed the country to large numbers of no go zones in which the police and doctors are afraid to go. Sharia law is de facto the law in these no go zones.
Economic growth has been anemic for years with unemployment above 8% for decades. Economic deficits are estimated to be 130% of GDP by the end of 2021.
Americans are worried about the stability of such a country , which has nuclear weapons
I've stated this before but am wondering if there is a correlation between the price of gold and the way the world views us
There may be a correlation between the value of the Dollar and the way the world views the US and with this there will be a correlation with the price of Gold.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.