What is a Weak Dollar?

A weak US dollar is a depreciation of the US dollar, and the exchange rate between the US dollar and other major currencies in the world continues to decline.

Weak dollar

Right!
A weak dollar means
The depreciating dollar has worried the international economic community. The call for "rescue the dollar and the world economy" is rising. What exactly made the dollar, once considered "hard currency," so "soft"? [1]
1. US economy benefits [2]
There are two ways the U.S. economy can benefit from a weak dollar. The first direct path is trade. The weak US dollar is structurally manifested as the overall weakening of the US dollar against major currencies, which sets the tone for the development of bilateral trade at all levels in a direction that is beneficial to the United States. The second indirect path is consumption. The short-term US dollar s immediate results as a result of the Federal Reserve s loose monetary policy provided unexpected assistance to the recovery of US consumer confidence.
2. Negative effects of the world economy
First, the weak dollar has brought about a deep disorder in the international monetary system.
Volatility in the international commodity market shows a high correlation with changes in the value of the US dollar. On November 6, 2007, when the US dollar index hit a new low, the price of gold rose to $ 814.83 per ounce. The low was up 221%. On the same day, crude oil prices also reached a high of 95.10 US dollars per barrel. On November 1, the price of oil once hit a new high of this century at 96.24. The disorder of the international monetary system has forced countries to adjust the structure of foreign exchange reserves, increased uncertainty in international financial markets, and created opportunities for speculative activities to heat up.
Second, the weak dollar has brought about weakening expectations of world economic growth.
Compared with the medium and long-term damage of the US real economy in the subprime debt crisis, the growth momentum of Europe, Japan and emerging market economies is still good, but due to the rapid appreciation of the local currency exchange rate relative to the US dollar, this economic cycle country mismatch It will tend to weaken, and the global economic growth path will be lowered due to the uncertainty of excessive fluctuations in the exchange rate market. On November 6, 2007, when the US dollar index hit a new low, the euro reached a new high of this century at 1.4531 against the US dollar, an increase of 76.56% from the low of this century in 2000. At the same time as the renown of the "new currency", The euro zone economy, which has stepped out of the long-term shadow of infrastructure adjustment, is facing the embarrassment of returning to the recession under the influence of shrinking exports.
Finally, the weak dollar has worsened global excess liquidity.
As the world s largest consumer market and investment market, Americans use dollars to consume goods priced in dollars from other countries, and to calculate the local investment income in dollars, the depreciation of the dollar is obviously an unrelated neutral event. However, overseas holders of US dollar assets have indeed suffered investment losses caused by changes in exchange rates. Against this background, the reduction of US dollar assets has become a fashion. In August 2007, Japan and China each reduced their holdings by 4.1%. And 2.2% of U.S. Treasury bonds, the reduction rate reached a five-year high. During the same period, external holders also sold US $ 1.242 billion of US corporate bonds and US $ 40.637 billion of US stocks. The reduction ratios were as high as 129.63% and 291.55% . The reduction in US dollar assets has further exacerbated the problem of global liquidity caused by the Federal Reserve s loose monetary policy, making it difficult to curb asset price surges and increasing global inflationary pressures.
In addition, the depreciation of the US dollar has also brought about many other subtle levels of "externality" issues such as the distorted information transmission of global corporate market value comparisons and the impact of the Hong Kong linked exchange rate system.

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