The USD is Tumbling: Why?

The USD is continuing to show weakness in Asian trade which is helping prop up the Aussie and Kiwi.

There hasn’t been much love for the Greenback in the back half of 2020 as political uncertainty moves to all-time highs, while the rate of money printing from the part of the Federal Reserve is likewise at levels not seen before.

Theoretically, printing money to purchase Government bonds, isn’t that bad for the Government, because they are paying the lowest interest rates on record. If a Government’s debt load is measured by their ability to service debt, then with interest rates so low – under 1.0%, that would mean that the debt load could be justifiably higher. Say 5x higher, to have the same level of interest that a 5.0% interest rate might have.

On the flip side, printing money is simply devaluing the USD. If the supply of something increases, then logic would suggest its value also decreases. The falling USD is having the same sort of impact on other areas as well, forcing up the likes of the AUD/USD and NZD/USD and other majors, as well as increasing the value of GOLD and WTI as they are priced in the USD. Devaluing a currency also helps boost physical assets.

The other storyline here for the USD is a loss of trust in Government. Ever since the Nov 3 US Election, it has become increasingly clear that something is amiss. Widespread claims of voter fraud have been largely ignored in the mainstream media and blacked out across social media. This will all likely come to a head as Congress meets on January 6th to vote on the decision of the electoral colleges. Clearly, the falling USD suggests things are not all that they seem at the moment. Corruption runs deep and it will be tough to drain the swamp.

As we look to the chart of the US Dollar Index (DXY) we can see that price has just started to test the lows of around that 89.75 mark. For the time being, I can’t see anything saving the Greenback as we head towards arguably the most volialte month of politics we have ever seen. I remain heavily biased to the downside for the time being, looking to sell bounces.