"The dollar is in excellent shape", US President Donald Trump recently said in response to a journalist's question about the value of the US currency. But given Trump's assurances that everything is developing in the best way under his leadership, any other answer would be surprising, notes German public broadcaster ZDF. The media outlet emphasizes that the dollar's depreciation is mainly a reflection of the lack of confidence in President Trump's policies.
Gold and silver as safer havens
The dollar started the year in not very good shape, then continued to fall, reaching a value of over $1.20 per 1 euro in mid-week. The reasons have been clear for months, economist Carsten Brzeski told ZDF. "Investors are reorienting and heading to other regions outside the US. They are also looking for safer havens, which explains the high price of gold and silver."
Meanwhile, the prices of gold and silver are breaking new records. An ounce of gold is now worth more than $5,200. Investors around the world - but especially issuing banks - are buying gold and filling their vaults. The plus for silver is mainly explained by the increased demand for its use in artificial intelligence systems - in chips and high-tech servers. Accordingly, there is no end in sight to the growth in the prices of precious metals, writes ZDF.
"Currently, discussions related to Greenland and the incidents in Minneapolis are also responsible for the weakness of the dollar," Brezhsky emphasizes. The economist adds that investors are skeptical about what is happening in the US and therefore prefer to diversify.
Strong euro stimulates consumption
The weak dollar and the strong euro are a source of difficulties for German exporters, writes ZDF. Although the exchange rate of $ 1.20 for 1 euro is not yet a cause for concern, export-oriented companies are starting to encounter difficulties with the sale of their goods outside the eurozone. According to Brzeski, the weakness of the dollar acts as an additional duty for exporters.
However, the effect of the weak dollar is two-sided, the German public media notes. Since a large part of goods imported into the eurozone are paid for in dollars, the weak exchange rate of the US currency is an advantage for consumers. This applies mainly to oil, i.e. prices at gas stations should fall. At the same time, the prices of trips abroad, which are paid for in dollars, should also become cheaper, and the economy could also revive.
The strong euro "supports the purchasing power of European households and stimulates consumption and tourism abroad," banker John Plassard told ZDF.
He added that "the strong euro is good news for European importers, especially in the fields of chemistry, construction, aviation or in industries with high energy and raw material consumption."
The dollar is losing prestige
The European Central Bank is closely monitoring the ratio between the euro and the dollar. If the euro appreciates further, this will lead to cheaper imports, since raw materials are mainly paid for in dollars. This could reduce inflation and create the conditions for reducing interest rates. Carsten Brzeski explains to ZDF: "At an exchange rate of $1.20 per euro, the ECB has nothing to fear". And in the long run, cheaper loans help, as it makes it easier for companies to invest.
However, the opposite is true for Americans, the German public media outlet points out - on the other side of the Atlantic, things are getting more expensive for most people. Imports are already becoming more expensive due to Trump's tariffs. Against this background, the purchasing power of American consumers is falling.
ZDF summarizes that the dollar has long lost its prestige as a leading currency, as can be seen from its current weakness. But that does not necessarily mean that it is in danger of falling out of favor as a leading currency. After all, it was in "excellent condition", as Donald Trump says. But maybe that's just how he thinks.