Market News
Dollar has become a 'falling chainsaw' - what it means for you - SKYNEWS
There's a sense of crisis hanging over the US dollar - and it has consequences for all of us.
Its roots can be traced back to last year when its value against a basket of other international currencies, including the pound, fell by 9%.
We've seen that extend by more than 2% in January to date. Earlier on Tuesday, the pound was at its highest level against the dollar since July 2021.
Much of the dollar weakness is being attributed to the actions and threats that have oozed from Donald Trump since he returned to power.
The US president's trade war has damaged the effect the greenback (the world's reserve currency) has on the world stage.
Wider foreign policy, including military action against Iran and in Venezuela too, hasn't helped. Remember the tariff threats against NATO allies over Greenland - since dropped?
Other factors include market fears over the Federal Reserve's independence and huge increases in public spending which have called into question the chances of a budget deal on Capitol Hill to avert a fresh government shutdown ahead.
In effect, we're seeing a crisis of confidence engulf the dollar under a weight of uncertainties, despite a healthy pace of economic growth in the world's largest economy. Consumer confidence data out this week added to the jitters of a big shift towards negative sentiment.
Japan's contribution
The pressures on the dollar have been compounded this week by speculation of joint US and Japanese central bank action to help stabilise the weak Yen.
Its value has collapsed on the back of persistently low interest rates which have made it attractive as a source of credit to invest in higher-yielding currencies.
The falling dollar, however, has eroded expectations that intervention will actually be needed.
