Dollar gaining strength lately

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#1Dec 24, 2020, 01:24 PM
With all these crises and wars, we’re seeing other currencies weaken against the dollar. The US can just print more cash and kind of export inflation, since so many other currencies are becoming weaker for trading purposes. It’s like a balancing act if one thing goes up, something else has to drop. If everything keeps rising without any checks, then nothing really holds value. Value shows up when we compare things to each other. Take a workplace: imagine 10 workers all doing the same job, but one of them consistently outperforms the rest. The company notices this and encourages everyone else to step up their game to match those results. We can only assess or gauge something when we have something to compare it to. Same goes for the dollar; its strength is only visible when other currencies are falling against it. Currency strength is all about relative value. The idea that the dollar is weak often comes from the fact that other currencies have been doing well, not necessarily because the dollar itself is weak. Every light casts a shadow... and you can’t see that shadow without light. The US and the dollar might be the economic light, but there’s always gonna be a shadow somewhere.
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king2011Full Member
Posts: 144 · Reputation: 436
#2Dec 24, 2020, 06:30 PM
From these phenomena we can say that global economic influenced by conflict not only macro fundamental. These shortterm USD strengthening is already seen and easily predictable due to global economic structure, in many crisis situations, USD is considered the world's main safe haven and investor favorite choice. I didn't say that USD is zero risk but USD usually weaken when the FED printing money, extrem fiscal deficit and when investor confidence in US declines, beside those, other condition such as war, global markey collapsed, debt crisis all make USD become stronger. Referring to hegemonic stability theory, as long as there is no systemic replacement, the hegemon remains the anchor, even when criticized. THis is the real situation the world face now even anti US still use USD as national reserve. But, in the hand of Trump, he used USD as sanctions and  asset freezing tools. Using USD as geopolitical pressure tools can make erotion on USD dominance, when currency/USD  can be politicized, many countries will try to reduce dependence and look for alternatives in parallel https://en.wikipedia.org/wiki/Hegemonic_stability_theory
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