The U.S. dollar has already lost nearly 2% of its value against other currencies and is trading at its lowest level in more than three years. This follows a 10% decline for the dollar in 2017.
What’s going on? At first blush, the drop is a bit of a mystery because the Federal Reserve has been raising interest rates for the past year.
Rate hikes usually boost the dollar’s value because they cause more foreign investors to buy American assets. They also help keep inflation in check.
The U.S. economy has enjoyed two consecutive quarters of solid growth as well, and strong holiday sales suggest that trend continued at the end of the year. Many experts are predicting even more momentum for the economy from the recent tax cuts.
But take a step back and it shouldn’t be a surprise that the dollar is slumping. Nor should it be a major concern just yet.