Currency Outlook: The Dollar, Yen, Euro

Recent economic uncertainty has propelled the dollar down against the yen, resulting in a gradual reduction in the dollar’s overall value. The dollar has also performed relatively poorly against the euro, and some are blaming uncertainty about the Affordable Care Act for sluggish performance.

Dollar Performance Against Other Currencies

Against the euro and yen, the dollar has shown similar parallels, mainly driven by economic uncertainty and the recent rise in interest rates. The recent debates over health care and the talk of replacing or not replacing the Affordable Care Act have increased that uncertainty.

The yen has attracted a significant amount of investment in particular, as seen by the four-month low on the USD/JPY rate on March 22. However, trade on March 23 saw a brief resurgence, primarily due to the gains on Wall Street — although the ACA vote tempered these upward trends as well.

The US dollar has performed variably against the pound, seeing recent increases against that currency that are likely driven by Brexit worry and the potential for a vote on Scottish independence. Those factors have led the pound to bounce significantly against the dollar, although USD/GBP is also trading lower as a result of market uncertainty over the ACA repeal.

Continued Questions Over the ACA

The outcome of the ACA does have an impact on the American economy, and much of the focus seems to be on creating a good health care plan for the United States that ensures that everyday people don’t lose out. With some lawmakers wanting a complete repeal and others wanting key provisions kept, it seems that a compromise inevitable — but whether it will pass through the two houses is another question. With investors unable to glean the possible outcome of ACA policies — and so many financial retirement decisions tied to health and health care — it’s not surprising that the dollar is trending downward.

The fall in the dollar, however, has signaled a rise in the price of gold. Again, market uncertainty pushes the price of gold up gently, securing it as an investment that hedges against market instability. If the ACA vote does fall through, it seems likely that the price of gold will increase in response to the increased economic uncertainty, and if the ACA vote is passed, the price of gold will likely remain stable over the long-term.

Gold is a historically sound choice for any portfolio, as it provides key benefits for investors in a variety of economic times. At a time when currencies of all types seem increasingly unstable, gold creates a safe foundation for retirement savings.