The US dollar index is perhaps one of the lesser-publicized economic indicators
- in mainstream financial media,
- but it’s followed closely by seasoned precious metals investors.
- The index tracks the dollar’s strength against a basket of currencies.
- A decline in the dollar index indicates a weakening dollar, while an increase indicates a strengthening dollar.
- Declines in the dollar index are often correlated with weakening economic conditions.
- The index reached its all-time lows in early 2008, just a few months before the financial crisis hit.
The dollar index is currently trading around 93 to 94
- up from its low in the 91s in September.
- Many commentators are calling the current mini-rally a dead cat bounce,
- however, as the dollar has declined significantly from its highs around 103 at the beginning of the year.
- It shouldn’t be surprising to see the dollar continue to fall as the year progresses.
- That’s particularly true given the fact that President Trump has nominated Jay Powell to be the next Chairman of the Federal Reserve’s Board of Governors.
- His conduct of monetary policy shouldn’t be expected to be much better than that of Janet Yellen,
- so be prepared to expect more loose monetary policy in the years to come.
Overheated stock markets and a declining dollar index
- are both leading indicators of a coming market crash and
- a likely financial crisis.