The US dollar has suffered major losses in recent months. In general, the coins go up and go down, but the recent dollar decline was particularly intense.

So why does the dollar fall and how much does this matter?

The dollar image since Trump was elected

The American currency was rising last fall, on the one hand in view of the presidential election and on the other due to the relatively strong growth of the US economy. He maintained this trend after Donald Trump’s victory in November.

The US president’s initial statements on commercial policy had a positive impact on the dollar, as many investors estimated that the duties he promised to impose would boost inflation, forcing the Central Bank (Fed) to increase interest rates or at least not as much as they were.

The prospect of higher interest rates in the US makes the dollar more attractive, as this means that investors will earn more than their cash if they have them in American currency than in others.

However, this logic is rejected as the details of Trump’s duties are revealed – which often “freeze” or in the case of China are increasing – creating a great uncertainty round of their impact.

But now, the growth of the US economy is expected to fade.

And this has a negative impact on the dollar, which has recorded a sharp decline. Trump’s attacks on Fed chief Jerome Powell, who refuses to cut interest rates, has aggravated the dollar image.

The value of the coins is up and down influenced by factors such as inflation, central banks policies and more. However, the dollar index, which measures its power against a set of coins, has fallen to the lowest level of the last three years.

Shares and dollar in the tartars

In general, the dollar is considered a safe investment in difficult times.

Thus, the sharp decline in the coin – as well as the recent sale of US government bonds, which are also generally considered a safe asset – is unusual.

The dollar’s fall following Trump’s announcement by Trump on “Release Day” was “quite shocking”, says Jane Foley, head of Strategy Foreign (FX) in Rabobank.

“For several years, the market has been buying this US growth story, the US stock market has been outsourcing over other stock markets, and suddenly economists appeared who believed that the duties would push the US into recession,” Foley says, pointing to the US.

What does a weaker dollar mean

The Americans will realize that they have a weaker currency in their pockets during their first visit abroad when they need more dollars in their transactions. In contrast, tourists in the US will see that their own currency will have more purchasing power.

In addition, fluctuations on the dollar have a huge impact internationally, much more than the fluctuations of other coins. This is because it is the main reserve currency of the world, which means that the central banks worldwide are holding it in large quantities as part of their foreign exchange reserves, to pay their international transactions, to repay their international debt or to support domestic exchange.

Among other things, the dollar is the main currency in international trade and is used about half of world transactions.

Falling to the dollar means that exports of US products are becoming cheaper. But imported products can become more expensive because of the weaker currency, but also because of the immediate impact on tariffs.

Many goods traded internationally, such as oil and gas, are also valued in dollars. A weaker dollar means that oil will be cheaper in countries with other coins.

And if the dollar continues to fall?

For the US a strong dollar is a symbol of its political power. In this context, it is inconceivable to lose its status as a global reserve currency. Rabobank’s Jane Foley estimates that even if other coins are more strong, the dollar is not going to lose its status in the near future, though Fed official had implied last year that it is something that the US should no longer be considered for granted.

Other economists predict that the US dollar is expected to win in the coming weeks from its lost ground, but warn that it will not be able to return where it was.