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https://www.wsj.com/finance/currencies/what-the-sl...


What the Slide in the Dollar Means for Trade, Travel and Investment
Currency’s drop renews fears that U.S. position in markets is waning

By David Uberti and Chelsey Dulaney, The Wall Street Journal, Jan. 28, 2026

The dollar’s value has fallen to its lowest level in years, affecting international travel, U.S. corporate profits and European exports.

Wall Street anticipates further dollar weakness, potentially ending a decadelong period of U.S. economic outperformance and investor appeal.

The dollar’s decline is causing issues for other economies, with European central bankers monitoring the euro’s strength and its effect on inflation.

The dollar’s strength over the past decade pushed the stock market higher and helped Americans access cheaper loans to invest in homes or businesses. At the same time, a stronger dollar afforded consumers more purchasing power to buy goods and services from abroad [which reduced inflation]…

The currency last year posted its worst annual performance since 2017. Trade shocks and signs of a slowing economy sparked a “Sell America” trade that dinged U.S. assets. While stocks and bonds recovered, the dollar remained lower, weighed down by fears that a debt-burdened U.S. is scrambling the global order underpinning its own growth…

Some investors warn the dollar’s shift lower could also hit the bottom lines of U.S. companies that import parts and materials and potentially buoy U.S. inflation. Fed Chair Jerome Powell on Wednesday declined to comment on the dollar’s value.

The flip side is that big tech companies, oil exporters and other businesses with overseas customers could see a boost, potentially negating some of the negative effects of a weaker dollar… [end quote]

fred.stlouisfed.org
Nominal Broad U.S. Dollar Index
https://fred.stlouisfed.org/series/TWEXBGSMTH
Nominal Broad U.S. Dollar Index

The overall trend in the Nominal Broad U.S. Dollar Index since 2012 has been toward a stronger USD.

However, the USD has plunged since January 2025 especially during March and April 2025 when President Trump imposed high tariffs and there was a lot of uncertainty. The stock market recovered but the USD did not. Recently, USD made a sharp drop in January 2026 at the same time that gold and silver skyrocketed.

https://stockcharts.com/sc3/ui/?s=%24USD

https://stockcharts.com/sc3/ui/?s=%24GOLD

https://stockcharts.com/sc3/ui/?s=%24SILVER


If this is speculation and short term it’s not a cause for concern. (Apart from speculators who may have bought the precious metals on margin.) But if real money – actual USDs, physical gold and silver -- as opposed to asset prices that are buoyed by a flood of debt –- continue to signal a breakdown of confidence in the USD there could be a Macroeconomic trend shift all over the world.

Wendy

"But if real money – actual USDs, physical gold and silver -- as opposed to asset prices that are buoyed by a flood of debt –- continue to signal a breakdown of confidence in the USD there could be a Macroeconomic trend shift all over the world"
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I am the furthest thing from a monetary-policy expert.

The US$ has been considered a safe haven, possibly due to the rule of law practiced in the USA. It was considered a sure thing that anybody could invest in US Markets and not have their assets seized, and not have any contract unlawfully terminated. If not a sure thing, then an extremely low risk.

The US benefited greatly from being the de facto "world's safe haven" currency. US taxpayers collectively pay only a fraction of the tax dollars spent by the government, the rest is borrowed, and rolled over into new borrowings, year after year after year. IMO, the rest of the world would be insane to not demand more US$'s for any goods or services they sell to us.

Couple that with the current administration breaking trade agreements on a whim, and the rest of the world really has no logical reason to not look elsewhere for trade partners. It seems like the rest of the world could figure out a way to not feel that they have to buy US Treasuries. And for all of the Country's we are alienating, that could be a good strategy to severely weaken the USA. If interest rates on US T's have to rise to attract buyers, that burden could/would cause a chain of events that none of us really want to experience.

@UpNorthJoe wrote (among other well-reasoned points), "If interest rates on US T's have to rise to attract buyers, that burden could/would cause a chain of events that none of us really want to experience."

Joe, I rec'd your good post. Many people, including myself, are concerned about the dramatic rise in U.S. debt. The book, "This Time Is Different," describes how many nations in history failed after their debt exceeded 100% of GDP.

https://fred.stlouisfed.org/series/GFDEGDQ188S

https://www.cbo.gov/publication/60870

Bond traders in the free market have already forced a steeper Treasury yield curve.
https://stockcharts.com/freecharts/yieldcurve.php

The Federal Reserve bought many long-term Treasury and GSE bonds to repress yields. They tapered their bloated book to some degree but they could turn on a dime and do QE again.
https://fred.stlouisfed.org/series/WALCL

Pumping fiat money into the system increases asset prices (such as stocks and homes) if the money goes to financial institutions. Fiscal stimulus, which originates with Congress and goes into consumer pockets, causes consumer price inflation.

None of this is good for long-term stability. Like you, I don't know why our international suppliers sell their goods to us and then buy Treasuries with the trade surplus. Oh...yes, I do. They have huge populations and must keep them employed for political stability.
Wendy

Wendy,

I noticed Scott Besson touting a strong dollar today at the same time as the Trump administration is threatening the Fed because they are not dropping interest rates. This makes as much sense as denying climate change but threatening Greenland because the polar ice cap is melting and exposing minerals to plundering.

There are a number of ways to look at a "strong dollar". First of all defining what it means. I'm going to say that we are referring to the US Dollar index, a mathematical value related to a combination of ratios to a group of other major currencies (USDX = 50.14348112 × EURUSD^-0.576 × USDJPY^0.136 × GBPUSD^-0.119 × USDCAD^0.091 × USDSEK^0.042 × USDCHF^0.036).

I am also going to write this through the lenses of someone in the US who is evaluating things in the basis of US dollars (as things might look very different if you based the observations on a different currency.

1) Global capital migrates towards countries where the effective interest rate provides a positive return. This tends to develop into c "carry trade". This tends to boost the value of that currency, but the feedback loop applies negative pressure on the very rates which encouraged the flow. This was a major problem for the Japanese economy during its rah-rah days. To give Scott Besson his wish, it would "simply" be a matter of the Fed raising interest rates.

2) The nominal value of earnings by a company doing business abroad (even if they are flat, in terms of local currency), when translated into USD, is increased as the currency those earnings were in rises compared to the US dollar. As these earnings increase (as reported in US dollars), there is an upward pressured on their stock price in terms of USD (though no necessarily in terms of their foreign currency). Therefore, a drop in the US dollar is bullish for stocks doing business abroad which are listed on US exchanges.

3) A drop in the US dollar makes US produced goods, food, service, whatever more affordable and competitive in foreign markets.

4) Bad news: Imported good tend to increase in cost as the USD drops. If they still cost less than producing them domestically, this is inflationary.

5) Real estate costs abroad become more expensive in terms of USD. This possibly concerns some i n the administration

6) There is an impact on the ego of some who think a strong USD is a sign of a strong country. The challenge in this way of thinking is that we are a country of economic tranches where the wealthy spend far less (proportionately) on goods and services than the lower tranches. We are woefully unprepared, both economically and socially to become a true economically strong country (like, say Norway or Switzerland).

From a macroeconomically perspective, the WSJ article is unidimensional and can be misleading.

As you have previously pointed out, the greatest danger to our economic structure is unhedged debt. I believe the rise in gold's price is related to some using it as a hedge against a crack in the USD structure caused by too many cooks in Washington stirring the pot in random directions. While (presumably) none of the readers of these posts is in a position to change that, in order to protect assets evaluated in terms of US dollars, now is the time to contemplate how best to protect the value of accumulated assets in a future relationship to the currency.

Jeff

For those of us, that is to say - me, who are less savvy about currency exchange rates this might be worth reading.

https://www.investopedia.com/dollar-hits-4-year-lo...

When the dollar weakens, you feel the effects in just about every part of your financial life:

Higher prices for imports: The Trump tariffs have already increased the cost of electronics, clothing, cars, and appliances. A weaker dollar means the vast majority of imported goods would become even more expensive.

Increased fuel costs: Global oil markets price crude in dollars. When the greenback weakens, oil becomes cheaper for other countries, which can boost global demand and push prices higher at American pumps.

Higher interest rates: Mortgages, auto loans, and credit cards would become more expensive if foreign investors demand higher yields on U.S. Treasury bonds, which happens when the dollar grows weaker.

Squeezed retirement savings: Retirees face a double hit: inflation erodes purchasing power, while the value of their bond-heavy portfolios may decline.

Pricier travel abroad: Your dollars buy less in Europe, Asia, or anywhere else. Foreign vacations, international education, and overseas purchases all become more expensive.

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