Dollar Declines to Lowest Level in 2010 as U.S. Growth Slows


The dollar dropped below 86 yen for the first time this year as a government report showed U.S. economic growth slowed in the second quarter.

Bloomberg

Finally a rational reaction of the currency of a nation in which the economy is struggling. It makes no sense for a currency to strengthen if economic activity in a country is slowing. Why? Because if economic activity is slowing, there is less output being produced which means there is less demand to buy that country’s currency in order to buy its goods. Now of course since there is still the perception that the US dollar is the reserve currency, sure, if any major slowdown happens anywhere (even the US), often people will rush into the USD. However, with this news that the economy is slowing and the dollar hitting a new 2010 low, to me this means that more people are not rushing to the dollar as a safe haven… but rather other currencies (specifically the Yen today) and gold and silver which are both up on the day.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: