Part 4/10:
Earlier in the year, external factors contributed to dollar weakness. For instance, Germany’s surprise fiscal stimulus in March caused a 4% decline in the dollar’s trade-weighted value, highlighting how global fiscal policies influence US currency strength. When analyzing the dollar's performance since the US elections, its relatively flat trend masked the underlying vulnerabilities.
Recently, however, the dollar’s decline has accelerated despite widening US interest rate differentials with foreign currencies. Typically, higher US interest rates attract foreign capital, strengthening the dollar. The fact that the dollar continues to fall against major currencies like the euro, yen, and pound indicates something fundamentally shifting in market perceptions.