Would the coveted Greenback lose around the world? Since the beginning of the year, the dollar has decreased by more than 9% in front of a foreign currency basket (DXY index) of which the Japanese yen, the sterling pound or the euro are part. The single currency has also won almost 12% against the dollar since January and has reached levels never seen since 2021: 1 euro now allows you to obtain more than $ 1.16.
A depreciation of backback that does not worry Donald Trump. On the contrary, the US president is delighted. Although he claimed to appreciate a strong dollar, he said that at the end of July he preferred to have a lower dollar to “earn much more money.”
A blessing for US multinationals, not for consumers
A strong dollar increases the price of American products abroad and forces tourists traveling to the United States to pay more. With a low dollar, it is the opposite: the goods “made in the United States” become more accessible.
Suppose 1 euro is worth $ 1.05. A $ 100 product of the entire Atlantic will be sold for 95.24 euros with us. On the other hand, if 1 euro is worth $ 1.15, the same product will be sold just under 87 euros. Therefore, US export companies are winning in the price of competitiveness thanks to backback depreciation. And this is what interests Donald Trump, a defender of “America first”, whose customs tasks generally follow the same logic by degrading the competitiveness of foreign companies that sell their products in the American soil.
But it is above all the great US multinationals present worldwide who benefit from the weakness of the dollar. Especially because their income from their activity abroad proves to be higher as soon as they become this motto. During the presentation of its results of the second quarter, Amazon, for example, reports a “favorable impact” of variations in exchange rates of up to 1.5 billion dollars.
The fact is that a low dollar not only has advantages, since it adds the price of imported products and, therefore, runs the risk of feeding inflation. Certainly, Donald Trump aims to reduce the dependence of the United States to foreign goods thanks to the customs duties that will be supposed to encourage the establishment of factories throughout the Atlantic, but that will not materialize for many years. Meanwhile, national production is insufficient to meet demand, so that American consumers can hardly dispense with imported goods that, therefore, pay more.
Trump’s action encourages the drop in the dollar
If the loss of value in dollars since the beginning of the second mandate of Donald Trump of the second term, “a set of factors” according to Éric dor, the US president seems to be the main responsible: “There are anticipations of investors who think that customs duties will penalize growth and, therefore, will encourage the Fed to reduce their wires”, which makes the active assets in dollars less attractive, details of the economy.
This fall in rates, Donald Trump has been asking for a long time. However, the president of the Jerome Powell Federal Reserve opened the door to such a stage last week, invoking the need to support employment, because a “rapid” degradation of the labor market should not be excluded for the institution that has already warned against the risk of staplation of the US economy. Such change in expected monetary policy in September could consolidate the phenomenon of depreciation of the Back Greenback.
But the fall of the American motto is also accentuated by international institutional investors that show a “disaffection with the dollar” with less confidence in US assets, judges. A “conscience” that, according to him, translates that “having too many dollars has become a little more risky given Trump’s policy, his unpredictability and his aggressive attitude towards his partners. (…) All this chaos made the dollar less attractive.”
This White House tenant strategy also pushed the BRICs (Brazil, Russia, India, China, South Africa) to accelerate the common process aimed at reducing dependence on their economies to the dollar. A project that bothers Donald Trump, who has repeatedly threatened these countries with 100% customs duties if they continued to try to “get away from the dollar.”
Does the dollar remain the refuge value?
In fact, this is the entire contradiction of Donald Trump, who wishes to reduce the value of the dollar for both reasons of competitiveness, while preserving his role from the dominant reserve currency. But “you can’t have butter and butter money,” observes Éric dor.
To date, the participation of Greenback reserves in World Exchange amounts to almost 60% (compared to 20% for the euro), a 10 -point decrease in ten years. However, this beginning of the “delarization” phenomenon does not question the hegemony of the US currency. And Stephen Miran, Donald Trump advisor, even ensures that he can still see that his value falls without losing his character of refuge value.
In a test published in November 2024, the economist graduated from Harvard University acknowledges that world dollar domination is a real advantage for the United States. “But for him, the United States pays an excessive price,” said Éric Dor.
Stablecoins, a tool to strengthen the dollarization of the world economy
Therefore, backback depreciation is good news for Donald Trump’s advisor, who called him for his wishes. Given this, the US president uses new methods to preserve and increase the “exorbitant privilege” of the dollar internationally. Last: the promotion of Stablcoins backed by the dollar and promulgation in July of the first regulation in the United States, known as Genius Law, accurately framing these cryptocurrencies.
If Donald Trump loves Stablecoins so much, it is because the companies that emit Tether or Circle invest the money they receive (euro or dollar) in invoices of the US treasure, safe assets and liquids. In other words, “the stable backed by the dollar are an indirect way to reimburse US debt throughout the world and strengthen the dollarization of the world economy,” says Éric dor. And this at the same time reduces pressure on the costs of American loans.
Aware of the ploy, the European Central Bank recently alarmed when denouncing these cryptocurrencies that “remodel global finances, with the US dollar at the head.” Enough to “provide the United States with strategic and economic advantages”, which allows them to finance their debt at a lower cost while exerting a global influence. For Europe, this would result in greater financing costs compared to the United States, reduction of autonomy in monetary policy and geopolitical dependence. “
Source: BFM TV
