Dollar Suffers Worst Year Since 2003 (And The Future Looks Even Grimmer)

The US Dollar is down over 9% year-to-date against a broad basket of the world's fiat currencies, tumbled over 10% against gold, and has collapsed against Bitcoin; but, as Bloomberg's Garfield Reynolds warns, the dollar's worst year since 2003 is about to get "even grimmer" in 2018...

Via Bloomberg,

The one point of clarity coming out of Washington is that tax reform isn’t about to save the dollar where Fed rate hikes have failed.

 

CFTC data showed dollar shorts increased again in the second half of November after shrinking to the smallest level since June. That snapped a move that had suggested investors were about to go net dollar-long.

The dollar’s surge at the end of 2016 was built around accelerating U.S. growth and belief that the Fed would lead the developed world in tightening policy.

U.S. growth is still strong, and the Fed is still tightening, but the rest of the world is catching up and there’s doubt the U.S. can cope with significant dollar gains.

Tax reform was flagged as the next fuel for the rally, but that looks unlikely.

Backers of the plan say cutting corporate tax rates will fire up the economy, but the Fed and the IMF haven’t changed long-term forecasts for U.S. GDP even as the odds grow that some sort of reform will pass.

 

Monday’s news that Republican senators kept the alternative minimum tax for companies highlights how the partisan rush to pass the bill increased the odds of a flawed package.

 

It’s also illuminating to consider that the retreat in tech stocks is being attributed to speculation those firms will benefit least from the tax changes -- because existing breaks designed to encourage innovation arguably did just that.

 

Turning that around, it implies that those sectors that will benefit most are some of the U.S.’s least dynamic. That undermines the arguments for stronger growth.

The flattening of the Treasuries curve -- with benchmark 10-year yields totally range-bound -- is another vote of no-confidence.

That helps explain what is a very broad-based retreat: USD is in the red in 2017 against almost two-thirds of the 110+ global currencies that aren’t constrained by a peg.

Expect to see fresh breakouts for EUR and JPY, as the respective central banks are forced to cut stimulus thanks to burgeoning growth in Europe and policy exhaustion in Japan.

Traditional high-yield plays such as KRW, AUD, NZD, BRL will have a bias to climb (TRY and ZAR could join that list if politics takes a back seat) amid a positive global growth backdrop.

This time twelve months ago, markets were gearing up for the ’Year of the Dollar.’ That turned out badly, but the year ahead could be even bleaker now that its fans have abandoned it.

Comments

Bill of Rights Tue, 12/05/2017 - 20:44 Permalink

Yawn...yet were all investing to make those worthless pieces of paper..Othwewise enjoy that blue tarp city. Been reading this shit my whole life and hear I sit.

razorthin Tue, 12/05/2017 - 20:46 Permalink

It seems everyone has capitulated on gold and silver.  They were featured in at least a half-dozen articles a day, and these days - narry a whisper.What do you suppose that means?

Common_Cents22 Tue, 12/05/2017 - 20:53 Permalink

what can really replace the dollar in a significant way?  as bad as the US is,  any other country/currency of size is worse.    I suppose the globalist end game is to knock the dollar back several notches and bring in a global currency (SDR).

Withdrawn Sanction Common_Cents22 Tue, 12/05/2017 - 21:20 Permalink

Ive been hearing this claptrap about the IMF's SDR for years, and it's still doesn't pass the giggle test.  The SDR is nothing more than a special purpose currency whose value is dervied from a basket of (deplorables) currencies based on their relative contributions to the IMF bailout/management facilities.  SDRs outstanding currently total less than $300billion.  A lot of money to you and I, yes, but chump change when one considers the trillions of dollars of transactions that cross international borders (not to mention change hands internally) every DAY.  It's like asking a Toyota Corolla to pull a tractor trailer load of lead.  Good luck w/that.  Your first 2 sentences are spot on, however. it's true the dollar has had a bad year, as the chart porn in the article demonstrates; however, this article also sounds a lot like someone talking the opposite side of their book.  FWIW, the euro looks much more problematic for the coming year (bad banks, bad immigration/labor policies, and a hopeless taxation structure to name but a few of its more urgent problems).  The takeaway line (which they even underlined for us) This time twelve months ago, markets were gearing up for the ’Year of the Dollar.’ That turned out badly, but the year ahead could be even bleaker now that its fans have abandoned it.  When everyone is bearish, you should be....?  (Hint, if everyone has truly abandoned it, it means there are few sellers left...)

In reply to by Common_Cents22

Internet-is-Beast Tue, 12/05/2017 - 21:15 Permalink

The euro is strong due to immigration. All those immigrants bringing their talents, skills, and a high level of education can only breath life into the European economy. It is they who will now begin paying for the boomers retirements. Thank you Frau Merkel!

Pearson365 Tue, 12/05/2017 - 21:17 Permalink

The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion — policemen, customs guards, penal courts, prisons, in some countries even executioners — had to be put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done and hailed the dawn of the fiat-money millennium. – Ludwig von Mises

buzzsaw99 Tue, 12/05/2017 - 21:19 Permalink

sorry but that treasury curve - bloomturd usd index correlation is and always was crap.  i expect the usd to make gains against the yuan, yen, eur, and gold in 2018 no matter what happens with usa tax reform.  i could be wrong because markets are rigged by central banks and speculation, but since that's what we're talking about there it is.

Let it Go Tue, 12/05/2017 - 22:22 Permalink

When you consider just how destabilizing currency swings can be it is easy to see how a strong dollar could obliterate the global economy. It should not be a surprise in our current global economy that behind the curtain central bankers could be busy manipulating currencies so they trade in a narrow range that will not rock the boat. I contend they are keeping the dollar from moving higher.Like many Americans, I have railed against our growing debt and questioned whether it would destroy the dollar, however, when looking at the miserable alternative currencies before us the dollar is without a doubt king. We must not underestimate the advantage the dollar has being the world's reserve currency or the size of debt floating across the globe comprised in dollar based agreements. http://brucewilds.blogspot.com/2017/03/currencies-are-trading-in-false-paradigm.html

TeethVillage88s Tue, 12/05/2017 - 22:23 Permalink

All by Design.

This is all planned, part of planned inflation, planned money (USD) Deflation, and Bank Debt 50:1 Leverage as per Jim Rickards (2009-2015 created $60 Trillion).

God Damned Peasants. Wake the Fuck up.

bjax Wed, 12/06/2017 - 00:46 Permalink

The coming years are bad for FIAT .. end of story. All FIAT currencies collapse in the end. Normally sooner rather than later.