This Is The Dollar's Worst Year Since The Plaza Accord

Entering 2017, the USD had been up four years running on a broad trade-weighted basis with 8.6% gains in 2014, 10.7% appreciation in 2015 and a more modest 3.0% move in 2016.

That last year was a less dramatic move, but from May 2nd lows to the 15+ year peak on January 7th, the buck was up almost 9.3% or 14.5% at an annual pace.

Unfortunately for greenback bulls, things have gone wildly off-script since.

As Bespoke Investment Group details, the dollar has reversed its entire May 2016-January 2017 rally in a move that’s frankly shocked the FX world.

As shown below, for the broad trade weight dollar, this was the worst year on record through last Friday (latest data available) and the route has gotten worse this week with the Bloomberg USD Index (a decent proxy for the USD broad trade-weighted index) down a whopping 1.5% this week, its worst since the five days ending May 19th.

Source: Bespoke Investment Group

Given that US economic data has actually held up quite well and there have been no radical policy shifts from the FOMC, that’s a pretty staggering move.

On a narrow major currency basis, the USD is just as weak. As shown below, this was the worst YTD through September 1st since 1986 (the year following the Plaza Accord agreement to devalue the USD) and the second-worst ever after this week’s decline, besting the 10% devaluation of the dollar engineered in 1973.

Source: Bespoke Investment Group

Again, the contrast between the surging dollar post-election and the strong USD environment that prevailed for years before that event has been incredible: the dollar just won’t stop falling after it wouldn’t stop rising for years.

Comments

ET (not verified) Mon, 09/11/2017 - 22:29 Permalink

Physical Gold and Silver will be the best performing assets while Trump is President.He will be able to control the Fed with his many appointees. Cryptos are also exhibiting a positive correlation with stocks and other risk assets. The crash will be phenomenal.Cryptos are a huge scam and the curtain will be lifted soon. Just read all the complaints from users of the crypto exchanges. Fraud everywhere.Yale economist Robert Shiller also came out and said that cryptos are in a massive bubble.

Paul Kersey TeamDepends Mon, 09/11/2017 - 23:05 Permalink

The Plaza Accord was well planned to make the dollar tank against the yen. It was the beginning of the end for Japan, and it brought American manufacturing back. It was the classic "beggar thy neighbor" currency ploy. This latest dollar crash, however, doesn't seem to serve the same purpose, because it's been decades since the U.S. was a big manufacturing player in world trade. Today, the manufacturing all stars are China, Mexico and Germany.

In reply to by TeamDepends

aurum4040 ET (not verified) Mon, 09/11/2017 - 23:36 Permalink

The best performing assets?? SMH when will you guys ever learn. Since election night, gold is pretty much flat. Same with silver. And stocks? Do I even have to mention cryptos? In 6 months ETH returned over 4000%, XRP even more. Much more. BTC over 500%.  Gold has yet to return 1000% since the Gordon Brown lows in 2000. Going forward, where do you see gold? $2000, $5000, $10000, infinity? Also please explain the value of golds and silvers utility. I am currently stuck on Nebuchadnezzars 1 AU oz. to 350 loaves of bread analysis as it's still true 2700 years later. So when gold finally reverse backwardation blasts through $1 billion + a week CB short stomopdowns, finally beginning its hyperbolic golden unicorn run aka finally creeps over $1400 enroute to a paralyzing paranoia price of $20,000, that one oz of gold will probably still buy about 350 loaves of bread. Now that's an investment...You seem fairly knowledgeable about cryptos so if you could please explain exactly how you believe Ethereum and the 220 plus world class businesses worth trillions of dollars who back its development are a complete scam, I am all ears. And if you can elaborate how the most intriguing development platform that arguably has ever existed, a platform that can be utilized by anyone, any company, anywhere, anytime, on any machine that's runs any OS, how this Ethereum platform is a worthless scam that has far less utility than gold? One other thing - with these obvious scams obviously follows the most obvious short the world has ever seen, how much of your portfolio is actually short a single crypto currency? In other words, do you put your money where your mouth is? Or do you just like trading your money for the investment of investments of the last 2700 years in hopes to still be able to buy the same amount of bread aka any other necessity in 4817 A.D.? Inquiring minds want to know...

In reply to by ET (not verified)

vega113 aurum4040 Tue, 09/12/2017 - 01:13 Permalink

Ethereum is maybe not a scam, but very bad investment for sure. Bitcoin had one killer application - being digital store of value. Ethereum has none applications at all. Yes, after years of development and billions of investment there are exactly zero widely used dApps. This is not a coincidence. The smart contracts promised by Ethereum failed to materialize because:
- applications should take inputs from the real world to be useful. The onky input available to dApps is the blockchain internal state. Everything else should come from an Oracle, however, if you need an oracle, your app is centralized and you can just as well host it on EC2.
- a contract should be immutable, but immutable programs is a nogo. You need to fix bugs and add new features. If the program is mutable, it gains no advantages from being hosted on the blockchain
- But even if you created an immutable program, how do you know it has no bugs and functions as expected? You need formal verifications. But Ethereum languages or even Ethereum virtual machine do not support this.
- Running an app requires a lot of data, but storing data on the blockchain creates a bloat, thus causing miners centralization.
- There are ongoing edforts to allow sidechains and drivechains over bitcoin. These will allow to implement ethereum like functionality on top if bitcoin. Which means that Ethereum has mo first mover advantage.

In reply to by aurum4040

mmanvil74 vega113 Tue, 09/12/2017 - 01:38 Permalink

When computers first came out, the coolest thing you could do with them was type out your journal and save it on a floppy, or play some two dimensional game.When the internet first came out, the coolest thing you could do was browse a forum, or maybe send an email.Give crypto (and dapps built on them) time, like 5-10 years time. Then tell me how they "failed".

In reply to by vega113

OpenThePodBayDoorHAL vega113 Tue, 09/12/2017 - 04:00 Permalink

Finally, someone who has their thinking cap on. Vitalik and crew succumbed to massive hubris and decided they need a new language, new DB, new ledger, AND a new VM. OMG talk about attack surface area. And let's revisit the incredible massive benefit of "decentralization", since the computing cost and complexity of distributing it all is beyond massive, scale, compute cost, let alone if you have to buy a goofy token to pay the network for doing your work. And excellent point about "contracts" that are code. A contract is either immutable, or it isn't a contract, d'oh. And if your code IS immutable (LOL Ethereum Classic LOL) then how would you do upgrades, regression tests, bug fix etc. And we're hearing alot about "sidechains" and other off-ledger stuff, to which I guess I'd say we already have them: it's called BANKING. And don't get me started about representing real-world assets like gold on a blockchain. OK so it's Monday morning at 9 AM, you have a man with a bar of gold. What happens next? Oh, look, you issued a credit instrument. Could be useful but let's call it what it is.

In reply to by vega113

aurum4040 vega113 Tue, 09/12/2017 - 08:23 Permalink

SMH, you have absolutely no idea what you are talking about. Years? - Since 2015Failed to materialize? - Ask JP Morgan, BHP Billiton, and Microsoft (to name a few of thousands) what Ethereum projects they are working to bring to fruition. Metropolis is going to push ETH to half of BTC value. Oracle? Come from Oracle? No idea what you are talking about. You think formal verifications do not occur ? Are you kidding me right now? Do you know what immutable means? I can't continue here.   

In reply to by vega113

runnymede Mon, 09/11/2017 - 22:30 Permalink

The Creature from Jekyll Island now has full run of the place. Mission complete. Thanks for playing. Enjoy your centrally planned existence and in-perpetuity debt

NoDebt Buckaroo Banzai Mon, 09/11/2017 - 22:39 Permalink

I will bet you any amount of money you are willing to wager that the dollar is NOT in a permanent down-trend RELATIVE TO OHER CURRENCIES.All the major currencies of the world take turns devaluing.  All the central banks talk to eachother.  Relative to anything actually productive, yes, the dollar is in a permanent down-trend.  So are all the other currencies.  Being the odd man out in this game is death.  Ask the Swiss National Bank (SNB) about this. 

In reply to by Buckaroo Banzai

Déjà view Anonymous_Bene… Tue, 09/12/2017 - 00:20 Permalink

Strong $...WINNING!!

COUNTRY COMPARISON :: CURRENT ACCOUNT BALANCE

Top 4
1 EUROPEAN UNION $387,100,000,000 2016 EST.
2 GERMANY $294,300,000,000 2016 EST.
3 CHINA $196,400,000,000 2016 EST.
4 JAPAN $191,000,000,000 2016 EST.

Bottom 4
196 AUSTRALIA -$33,200,000,000 2016 EST.
197 CANADA -$51,080,000,000 2016 EST.
198 UNITED KINGDOM -$114,500,000,000 2016 EST.
199 UNITED STATES -$481,200,000,000 2016 EST.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...

In reply to by Anonymous_Bene…

sinbad2 NoDebt Tue, 09/12/2017 - 17:20 Permalink

"All the central banks talk to eachother."You think there is honour amongst thieves?Banks are cannibals, they will turn on each other in an instant, if there is a buck to be made.Look at how the Fed stole all the money in Iraqi and Libyan banks, and then created new central banks in the image of the Fed.

In reply to by NoDebt

JoJo Kracko Mon, 09/11/2017 - 23:01 Permalink

Has any other first or second world country had their debt to GDP rise faster than that of the USA over the last  8 years? Shouldn't people be shocked it hasn't fallen below 2005-2008 levels already?

Manipuflation Mon, 09/11/2017 - 23:18 Permalink

That's interesting.  I am not an FX guy but I did buy some Canuck bucks last May.  Looks like I made a little bit if I sell.  I started thinking that since it was "Buy Another 1911 day", that I might do just that.  I don't need more guns but this one caught me eye.  It's the Noreen BN36.  I would test drive one of those guns in 30-06 SPRG.  Check it out.http://onlylongrange.com/bn36-carbine-assassin-30-06/Hell yeah!  That is a bad ass rifle and it is made in Montana USA by people who likely think like we do.  I don't need it but need has nothing to do with it.  As soon as I saw it, I knew it was the AR version of a BAR.  My M1A is a classy lady but there is something about this "big black gun" that has my attention.  If you are going to have a fussy AR platform then I am interested.  I think ZHers will understand once you read up it.I was really looking for a 1873 Colt model repop pistol.  Old school.  I thought I wanted to stay true to the 45 Colt cartridge but the .357 magnum option makes more sense because it is twice as powerful and it is easier to find ammo.  Plus, I already have a 38 Special so which will fire just fine out of a .357 mag.  I already have the dies and the bullets and the powder/primers etc. so that would make more sense.  I won't just run out and buy something because I want more.  I only have two hands anyway.  But that isn't the point for me to have MOAR guns it is for a few of you to have soemthing like a BN36.  I don't think the gun is for beginners though and price tag is 2K.  I don't know why you would put a mil-spec trigger in it to begin with but it is offered with a national match trigger.  Well, what kind of trigger?  I've done a lot of triggers in my and I like the Timney triggers.  The gun looks like it is AR but really it is sniper rifle.  Through in another 1K for a scope and bipod and at least one clip.  It is not a cheap rifle but interesting though.No one has done a 30-06 semi-auto in an AR platform before that I know of unless it is wildcat.  https://www.youtube.com/watch?v=NMvvTIKZsZ4       

BurningBetty Tue, 09/12/2017 - 03:41 Permalink

You have to wonder, why now? Well...from the very first moment I became aware of that Pheonix standing on a pile of burning dollars on the front page of The Economist and they even put the year 2018 on it, that's all I needed to see to know that these guys are sticking to their agendas. They warned everyone who has eyes to see that the dollar is a goner. We will see dollar weakening throughout entire 2017.

falak pema Tue, 09/12/2017 - 07:58 Permalink

Did i miss something?The chart clearly indicates the up-down $ index to Yen which spiked down post Plaza and had to be then pushed up by the Louvre accords a year + later!Who lost out with this Reaganomics' monetary scamming to protect king $ both ways ?Japan !And we know how that played out!From 1989 onwards the Japanese; unable to sustain their mITI led export trade under the $ currency gun, had to MASSIVELY turn their investments and use their accumulated trade surpluses of past to invest at home : It led to the greatest incestuous spend of Japan Inc. in RE at home and destroyed the MITI model, creating the 20 year recession from which Japan has not recovered; having now, since 2008/2010 got sucked into the insidious loop of CB printing via Abenomics (like all the others!).Lesson there for CHina and all those others in the Asian pivot : get off the $ hegemony --based on outsourcing and petrodollar hold of ME oil patch-- of current model or you will suffer the past fate of Japan (Plaza+Louvre) currency manipulation and fucked up F.I.RE fake money blow-up!I think thats where we are and why the US Oligarchy is now in panic mode, as the Duck's fortress America head up ass about turn shows (Just listen to loose cannon Bannon and WW3 trumpeting to appreciate that slant). 

gm_general Tue, 09/12/2017 - 07:08 Permalink

Go to stockcharts site and draw a $USD chart starting before 1985. Connect the highs of 1985 and 2002, and extend that line to now. This is the downtrend resistance line. You will see when the Fed ended QE in 2014, the dollar went on a tear and broke above the 30 year down trend resistance line. It then did a couple of successful retests of the now support line in 2015 and 2016. Right now the recent drop has brought it very close to that support line. Either it will hold that line, or if it breaks back down into the former down trend, that is what to look for, what is very important IMO. Also, since it broke over the resistance line, the moves on each swing up and down are getting larger, like a megaphone pattern.

sinbad2 Tue, 09/12/2017 - 17:10 Permalink

Ahh the Plaza accord, that was where the US forced Japan to raise the value of the Yen by so much, their economy ground to a halt, and has stagnated ever since.The US tried to get China to revalue the Yuan in 2015, but China said get fucked, now all the talk in the US is the Yuan will surely crash, any day now.Amazing how black can turn into white in 2 years.