The US dollar falls to a three-year low, what impact does this have on the US economy?

Due to growing concerns about the stability of the US economy, the dollar exchange rate has dropped to its lowest point in three years, which could lead to a shrinkage in savings for American people. This depreciation may help domestic businesses that export American goods, but it will result in higher prices for Americans traveling internationally and importing goods. The dollar has depreciated by about 10% this year, while the euro reached its highest level in nearly four years after rising 0.4% on Tuesday. On Thursday, the dollar (as the world's major reserve currency) experienced a depreciation. There were reports earlier that President Trump is considering announcing the appointment of a new Fed chairman this fall, as the term of the current chairman Powell is set to end by the end of this year. The Fed has been under pressure from Trump to lower borrowing costs, but has not taken action yet in order to assess the inflationary impact of the president's trade policy and to maintain low unemployment rates. In addition to Trump's trade policy, his "big and beautiful bill" has also brought uncertainty to the US economy. Economists warn that the bill could increase federal debt by over $2.5 trillion, despite claims from the government that the bill would save money. Why is the dollar falling? There are many factors that influence the value of the dollar, including the demand for the currency in major central banks and other financial institutions. Additionally, the overall fiscal situation of the US (including inflation rates, trade relations, debt, and trade deficits) also plays a significant role. As warned by economists, the US may face an economic recession or slowdown, leading investors to reduce their investments in the US. Bilge Erten, an economics professor at Northeastern University, stated, "The institutional attractiveness of the US as a safe haven asset has significantly diminished, so when you know the dollar is likely to continue to depreciate, why would you invest in US assets?" Trump and his policies have raised concerns about the economic situation in recent months. However, some experts suggest that while political factors may affect the strength of the dollar, the depreciation was expected to occur as planned, regardless of who wins the 2024 presidential election. Harvard University professor Kenneth Rogoff stated in his writing, "The possibility of a decline in the dollar is high regardless of the outcome, and I believe it will fall further." Rogoff had predicted the depreciation of the dollar in his writing, stating that the decline in the value of the dollar is part of its normal fluctuations. He said, "It reached a peak that we only saw in 2002 and 1985, and in both periods, it sharply declined in the following years." The dollar recently saw a surge in value around 2015, but its value dropped during the COVID-19 pandemic, and then rose again. Rogoff suggests that the recent high value indicates an expected depreciation of the dollar in the coming years. However, this does not mean that the role of Trump's policies should be ignored. Rogoff pointed out that the president's comprehensive "D-Day" tariff policy could be a policy that "accelerated the process." Rogoff said, "Trump can easily make the dollar depreciate by saying things like 'If investors come to the US, I will tax them,' which is included in the Senate bill. This will obviously inhibit capital inflows and lead to a depreciation of the dollar. There are many ways to manipulate the dollar." How will the depreciation of the dollar affect Americans? The depreciation of the dollar exchange rate means that its exchange rate is not as strong, leading to increased costs for Americans traveling internationally. Experts warn that prices for imported goods will also rise. Erten said, "When Europeans sell goods to the US, they will consider the factor of the dollar depreciation because once they exchange the earned dollars into euros, the amount they receive will decrease. This means they have to sell goods at a higher price to get the same value." However, companies exporting American goods may gain a greater competitive advantage. The depreciation of the dollar means that, considering exchange rate factors, the prices of American goods and services will decrease. Rogoff said, "The costs of various services that American workers compete in will decrease." In this respect, the depreciation of the dollar may benefit Trump, as he has pledged to bring manufacturing jobs back to the US. On the other hand, the US labor market already faces many challenges, which may be further affected. A decrease in foreign investment in the US could lead to more unemployment, and according to the US Bureau of Labor Statistics, the current unemployment rate in the US is only 4.2%, at a relatively low level.