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.


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.


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