The Dollar’s decline didn’t start with the recent ‘Liberation Day’ tariffs. In fact, it has been gradually weakening since the 1970s.
More recently, however, the Dollar has lost value against many currencies since January. Why is that?
Why have the USD/CHF and USD/SGD strengthened against the US Dollar over the past few decades? One reason is that both countries have managed their money supply with discipline. For example, as of end-2024, Switzerland’s net federal debt stood at 141 billion Swiss franc, their debt to GDP ratio at 17.2%.
In contrast, the United States has expanded its national debt at an alarming rate. Some might point out that Japan’s debt-to-GDP ratio is even higher—around 230%. That is why the Japanese Yen has also been in decline for decades.
Why does printing more money through QE and increasing the money supply weaken a currency?
Just imagine in a close economy with 10 people and 1 central bank. If the central bank printed $100 and distributed equally to the 10, each of them will receive $10 to buy 10 available cheesecakes.
But now the central bank decided to print $1,000 and each person will have $100 to buy 10 available cheesecakes.
The global economy is not a close, but an open system.
When the US and other major economies printed massive amounts of money, they didn’t just inflate their own economies—they exported inflation worldwide. This contributes to rising cost of living not all around the world.
In my view, Gold is also a currency pair against the US at the start of 1971. The moment dollar unpeg itself from gold, gold appreciates. With each QE, we can see how the currencies have diluted with gold and inflation appreciating over these years.
Why different currencies have started to appreciate against the USD since January this year?
We can see all the currencies have either reached its bottomed in January and started moving higher or it formed a reversal pattern like the Aussie dollar and the Dollar Yuan, in this case with this inverted hammer, it is indicating Dollar Yuan to reverse downward, meaning dollar coming off and yuan to appreciate.
January was President Trump inauguration and February was when he rolled out tariffs against Canada, Mexico and China, and the market do not like that and has been selling the USD against the rest of the currencies?
If US has printed the so much money, but why other than Swiss franc and Singapore Dollar, many other currencies have been depreciating against dollars over the past decades?
I’d like to hear your thoughts on this.
Euro FX Futures & Options
Ticker: 6E
Minimum fluctuation:
0.000050 per Euro increment = $6.25
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Trading the Micro: cmegroup.com/markets/microsuite.html
More recently, however, the Dollar has lost value against many currencies since January. Why is that?
Why have the USD/CHF and USD/SGD strengthened against the US Dollar over the past few decades? One reason is that both countries have managed their money supply with discipline. For example, as of end-2024, Switzerland’s net federal debt stood at 141 billion Swiss franc, their debt to GDP ratio at 17.2%.
In contrast, the United States has expanded its national debt at an alarming rate. Some might point out that Japan’s debt-to-GDP ratio is even higher—around 230%. That is why the Japanese Yen has also been in decline for decades.
Why does printing more money through QE and increasing the money supply weaken a currency?
Just imagine in a close economy with 10 people and 1 central bank. If the central bank printed $100 and distributed equally to the 10, each of them will receive $10 to buy 10 available cheesecakes.
But now the central bank decided to print $1,000 and each person will have $100 to buy 10 available cheesecakes.
The global economy is not a close, but an open system.
When the US and other major economies printed massive amounts of money, they didn’t just inflate their own economies—they exported inflation worldwide. This contributes to rising cost of living not all around the world.
In my view, Gold is also a currency pair against the US at the start of 1971. The moment dollar unpeg itself from gold, gold appreciates. With each QE, we can see how the currencies have diluted with gold and inflation appreciating over these years.
Why different currencies have started to appreciate against the USD since January this year?
We can see all the currencies have either reached its bottomed in January and started moving higher or it formed a reversal pattern like the Aussie dollar and the Dollar Yuan, in this case with this inverted hammer, it is indicating Dollar Yuan to reverse downward, meaning dollar coming off and yuan to appreciate.
January was President Trump inauguration and February was when he rolled out tariffs against Canada, Mexico and China, and the market do not like that and has been selling the USD against the rest of the currencies?
If US has printed the so much money, but why other than Swiss franc and Singapore Dollar, many other currencies have been depreciating against dollars over the past decades?
I’d like to hear your thoughts on this.
Euro FX Futures & Options
Ticker: 6E
Minimum fluctuation:
0.000050 per Euro increment = $6.25
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Trading the Micro: cmegroup.com/markets/microsuite.html
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