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Dollar close to wrapping up longest drop since 2011

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,” Donald Trump noted in April.

Fast forward to the end of July, and the currency is on track to complete five straight months of declines – its longest spell in the dumps since April 2011.

At pixel time, the dollar index, which tracks the currency’s value against a basket of other currencies, is at 93.448, up a little on the day but marking a decline of nearly 2.2 per cent for July. It has dropped by some 9.5 per cent since the peak in January, stung by a mix of nerves over the rate outlook and political paralysis. (More on this here and here.)

Dutch bank ING notes that the dollar is increasingly struggling to shake off the negativity, even when the headlines and data are not so bad:

The dollar currently embodies characteristics of a currency seen as a “sell” almost under any circumstances. The market’s take on the largely unchanged FOMC statement last week as well as the still encouraging US Q2 GDP on Fri provides a case in point.

We think this week’s US data (solid US ISM manufacturing and non-manufacturing, as well as the expected sound US July employment report) should prevent meaningful dollar downside vs G10 low yielders (the euro, yen, sterling and Swiss franc), though it is unlikely to be enough to reverse emerging-market currencies’ gains against the dollar.

Meanwhile, Commerzbank says “it is a long time since the risk of the dollar losing its status as the global lead currency was this high”, thanks to “Washington’s permanent chaos”. Ulrich Leuchtmann at the bank writes:

The US President and the Republican majority in Congress are a burden for the US currency. The seventh month of Trump’s Presidency feels like the seven year itch in a marriage. Even if a small set-back is possible in terms of the euro, the general dollar weakness is likely to persist longer.