The dollar is down nearly 10 percent since the beginning of the year. That's bad news if you're a tourist traveling to Europe, but great news if your U.S. company sells goods overseas.
The greenback's tumble against a basket of currencies reflects both positive and negative trends, analysts say.
The biggest factor in the dollar's decline is doubts among currency investors that the Trump administration will be able to put in place pro-growth policies, says Jens Nordvig, CEO of Exante Data, a financial advisory firm.
"There was a lot of hope that we were going to get a big tax reform; there was a lot of hope that we were going to get fiscal expansion" in the form of government spending on infrastructure and consumer spending fueled by tax cuts, Nordvig says.
The absence of those policies, he says, along with lower-than-expected inflation, has eased pressure on the Federal Reserve to raise interest rates. Rising U.S. rates would have put upward pressure on the dollar.
While the policy gridlock may be viewed as a negative factor weighing down the dollar, Nordvig says, "positive" factors are also pushing the currency lower. A strengthening global economy is among them.
For example, faster growth in Europe is boosting the euro. It now costs $1.19 to buy one euro, up from $1.03 late last year. That's a disappointment for U.S. tourists visiting eurozone countries, because their money won't go as far. But it's a boon for U.S. exporters whose products are more competitive.
Growth in emerging markets is also accelerating. The broad increase in global growth is one reason U.S. stock indexes have risen to record highs even as the dollar is retreating. Global growth boosts the demand for U.S. goods, lifting the fortunes of American companies. In fact, close to half of the revenues of S&P 500 companies are due to foreign sales.
Nordvig says the dollar's decline this year needs to be put in a longer-term context. Its tumble follows a rapid 2 1/2-year climb that peaked around New Year's at highs not seen since the 1980s. So, even with its sharp pullback, the dollar is nowhere near touching new lows.
DAVID GREENE, HOST:
Let's talk about currency. The U.S. dollar rallied a bit last week. But it is still down sharply from its peak at the beginning of the year. So is that a good thing or is it kind of troubling? NPR's John Ydstie answers that question.
JOHN YDSTIE, BYLINE: Currency expert Jens Nordvig says the biggest factor in the dollar's fall is growing doubts that the Trump administration will be able to put in place its economic growth policies.
JENS NORDVIG: We came into the year with some very elevated expectations. There was a lot of hope that we were going to get a big tax reform. There was a lot of hope that we were going to get fiscal expansion.
YDSTIE: Which was supposed to come from a jump in government spending on infrastructure and consumer spending fueled by tax cuts. That would have led to faster growth and multiple interest rate hikes from the Federal Reserve. Rising U.S. rates would have put upward pressure on the dollar.
NORDVIG: The overarching theme has been that those expectations have been disappointed.
YDSTIE: But positive developments have also contributed to the dollar's decline, says Nordvig.
NORDVIG: If you look at the global picture where you have better growth in Europe, better growth in Canada, for example, those are positive things because there's something better going on in the global economy.
YDSTIE: That's pushed the value of the euro up about 15 percent against the dollar this year. That might make U.S. tourists unhappy, but it helps U.S. exporters whose products are now more competitive. Nordvig says it's also important to remember the dollar has weakened after peaking around New Year's at highs not seen since the 1980s. So the dollar is nowhere near touching new lows. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.