The dollar will weaken in the next decade
Since the beginning of the year, the us dollar has strengthened by about 1%, continuing a growth trend for almost a decade that was briefly interrupted in 2017. Since the dollar is influenced by two broad forces, the balance of payment flows and financial flows. JP Morgan economists expect the dollar to weaken in the coming years, but due to the current low-risk environment, the decline has not yet unfolded. The US has a very large current account deficit, and it has done so with only a few interruptions since the late 1970s. The expanding presence of globalization, combined with the huge us demand for foreign products, is likely to continue this trend. This large deficit floods the global market with US dollars, putting downward pressure on the currency in the form of bubbles. The relative attractiveness of US financial assets is beginning to decline. The difference in interest rates is narrowing as a result of COVID-19, with the Federal reserve (fed) intending to keep the Federal funds rate at the lower level for at least another two years; and the cyclical composition of many international economies and equity markets should mean that relative economic growth and equity market performance will be stronger abroad during the global economic recovery. This combination should remove foreign capital from US assets, putting additional downward pressure on the dollar. Over the next 10-15 years the dollar will weaken; but the exact catalyst for this change in trajectory is unclear.