The U.S. dollar rose marginally on the DXY foreign currency index over the last 24 hours, but even then few analysts really believe it will work its way back to where it was at the start of the year. The greenback is down 9.4% YTD.
“Now it doesn’t sound good, but you make a hell of a lot more money with a weaker dollar—not a weak dollar but a weaker dollar—than you do with a strong dollar,” he said on July 25.
The rest of the world has taken him at his word.
“Perhaps what’s happening with the USD’s weakness in the past few sessions is a renewed loss of faith in U.S. leadership, especially with the slew of super-high tariff rates that have been announced in recent days: 50% on Brazil, 50% on India, 100% on semiconductors, etc. This has certainly caused another round of deep consternation toward the U.S. in foreign capitals (Brasília, and New Delhi, for sure), and perhaps without any benefit of solid political-economic goals being achieved by the U.S. administration,” wrote Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, in a recent note.
Wizman believes this will have negative political consequences for the U.S., by driving the BRICS nations further into each others’ arms.
“Brazil may simply drift further toward China, as may India, if the tariff issue is not resolved amicably. The prospect that the BRICS will have even more willingness to ‘gang up’ on the USD and thereby move the needle away from the use of the USD as a reserve currency, is what may be getting more palpable, in the traders’ views, with each new tariff attack on some emerging markets,” he wrote.
It may not stop there. Consider the case of Swizterland, which until recently was a neutral country independent of the EU, and an ally of the U.S. Trump placed a 39% tariff rate on its exports, which will be catastrophic for its exports of pharmaceuticals, watches, and machine technology.
Here’s a snapshot of the action prior to the opening bell in New York:
