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Friday 26 January 2018

What is the reason for the dollar's depreciation?

In the shadow of the meteoric growth of US indices this year, the dollar declines faster and more than many analysts have predicted.
The dollar lost nearly 10 percent in the past year, which was its worst performance compared to other major currencies since 2003. Instead of changing its trend, however, in a state of growth in the US economy and a rise in interest rates, the dollar continued to decline in the new year 2018.
The decline in the dollar happened not only at a time of new record growth in US indices, but also in an environment of rising interest rates on 10-year bonds to their highest level in three years.
At the same time, interest on short-term loans rose to its highest levels since 2008. All of this should support a strong dollar. Instead, however, we are witnessing a continuing decline for "green money".
According to some experts, the tax incentives are the reason for this. While they are extremely good for stock markets, the rise in the US deficit increases interest rates on government bonds, and leads to the sale of debt securities.
The repatriation of capital by US companies, back to the United States, has triggered a depreciation of the dollar.
The rise in the US deficit has led the country to finance it with loans from other nations. This reduces the value of the dollar.


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