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Market Minute: Dollar depreciation disrupts its safe-haven status

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Since the beginning of the year, the American dollar has depreciated against all 14 major trading currencies as investors diversify away from risk associated with dollar-denominated assets.

A combustible mix of trade and fiscal policies has resulted in a questioning of the safe-haven status of the greenback with the dollar falling by about 11% against the euro since Jan. 1. On Wednesday, the dollar fell to 1.166 against the euro, a multi-year low which in our estimation is good approximation of fair value.

The policy mix out of Washington has effectively ended the dollar’s 14-year bull run as investors turn to focusing on the United States’ growing budget deficit, its reduced willingness to be the global consumer of last resort and Washington’s effort to narrow the American trade deficit.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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