Expansive monetary policy continues to affect the USD

In the past, President Trump has never hidden his contempt for the Fed and its militant policies, repeatedly pointing out that the central bank's rate hike regime is contributing to an overly strong dollar and sluggish economy. Trump had even gone so far as to urge the White House to look for ways to weaken the currency in order to boost exports and stimulate economic growth. The dollar has strengthened for much of the past decade, which has been blamed for the widening US deficit. But now Trump is finally getting what he always wanted: a weaker dollar, if not exactly on his terms. After hitting a three-year high on March 20, the dollar index - a measure of the strength of the currency against a basket of six international currencies - fell nearly 11% in one of the most dramatic falls in years. The dollar has fallen so much that hedge funds are falling against the currency for the first time in years. According to Bloomberg, last week the net futures and forward positions held by leveraged funds versus eight currencies (excluding the dollar) fell to -7,881 contracts, which essentially means there are more investors out there against the Dollars than bet on him. According to Bloomberg, the short selling wave is being driven in part by bullish bets on the euro, with the European currency outperforming the dollar by 6% since the start of the year. The euro is currently changing hands at $ 1.194 compared to $ 1.109 on Jan 1st. A major reason the dollar lost momentum can be attributed to the Fed's expansive monetary and fiscal policies, as well as its massive Covid-19 aid program. The central bank has made a number of rate cuts, most recently in March when it cut the base rate to 0% -0.25%, which was only the second time rates have effectively been cut to zero (the first time was during the financial crisis 2008). The Federal Reserve also launched a $ 700 billion bond-buying program, as well as a generous incentive, to help protect the U.S. economy from the ravages of the pandemic. This includes loans of up to $ 2.3 trillion to support state and local governments, employers, households, and the financial markets. The combined effect of these measures has resulted in an increasing supply of US dollars, leading to a gradual depreciation. To make matters worse, the dollar-buying frenzy that fueled the dollar rally in early March, shortly after the WHO declared Covid-19 a global pandemic, has cooled off considerably. As a successful vaccine against Covid-19 becomes more and more likely, calm is slowly returning to the global economy and the stock markets. As a result, the S&P 500 was able to push back all of its losses and is now on a 4.5% gain over the year to date.