US Dollar Analysis: USD Trends and Outlook

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Contributor, Benzinga
November 15, 2024

The U.S. dollar (USD) represents one of the most important currencies in the world. In this detailed U.S. dollar analysis, you’ll gain a glimpse into historical trends in the dollar’s value and the future outlook.

The following breakdown will also explore strategies to capitalize on the currency’s price movements, which can be helpful if you’re interested in trading forex or engaging in other investment activities.

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A recent FOREX.com report from October 2024 shows that the U.S. dollar has fluctuated significantly in the past year, with America’s currency dipping from recent peaks.

American officials have reported strong job numbers and GDP growth, which have helped the U.S. dollar strengthen slightly. However, the dollar might pull back if the Federal Reserve follows through with proposed policy changes. 

Additionally, anticipated interest rate cuts by the Federal Reserve could diminish the dollar’s appeal to investors.

Analysts have varying perspectives on the dollar’s short-term future. Those responsible for composing the FOREX.com report expressed concerns that potential Federal Reserve rate cuts and global economic shifts could lead to a gradual decline in value. 

Conversely, Goldman Sachs Research forecasts U.S. growth of 2.1% throughout 2024, which could sustain foreign investors’ interest in American assets. 

The dollar will remain a dominant force in global finance for the foreseeable future. However, it is important to stay apprised of the many factors at play to see how they might impact the currency’s value.

U.S. Dollar Forecast: What’s Next for the Global Reserve Currency?

Now that the dust has settled on the 2024 presidential election, experts are more willing to state their predictions about how the results will impact the value of the U.S. dollar going forward. However, market strategists and economic analysts are split on what will happen next.

According to a recent Reuters report, which features insights from Karl Schamotta, the chief market strategist at Toronto-based Corpay, president-elect Trump’s policies on immigration and tariffs could stoke inflation. Schamotta noted that Trump’s proposed tariffs could harm the outlook for other currencies. 

TD Securities Analytics also contributed to the report, stating that a “red wave” could negatively affect China’s outlook, which might kick-start a “sizable USD rally.” 

While experts disagree on how the Trump administration’s activities will influence the dollar’s value, they seem to agree that the effect will be a net positive.

But there’s much more at play than just the recent election results. The International Monetary Fund has been sounding the alarm about an “ongoing decline in dollar holdings” for some time.

The IMF cites various factors, including the emergence of digital currencies and efforts by other nations to reduce reliance on the U.S. dollar. Nations like Russia have strong political motivations for reducing their holdings of American dollars. 

While the dollar is expected to maintain its reserve currency status, its value may experience fluctuations due to economic and policy changes. 

U.S. Dollar’s Current Position: What Investors Should Know

As is evident, many factors impact the U.S. dollar’s current position. However, you don’t have to become an expert in geopolitics and cryptocurrencies to participate in forex exchange markets. However, you do need to familiarize yourself with the following concepts:

  • Currency Trading: The dollar’s movement significantly influences forex markets and recent trends could create new opportunities and risks 
  • Investment Strategies: A strong dollar can influence the stock market performance of all U.S. companies, especially those with international interests 
  • Diversification: You may want to diversify your holdings to hedge against currency risks

The value of the U.S. dollar represents an important forex trading signal and can strongly influence the value of other currencies. 

Value of U.S. Dollar Over Time

According to Statista, goods and services that cost a single dollar in 1700 would cost approximately 63 dollars in 2020. Based on these figures, the purchasing power of a single dollar in 2020 would be 1, while that of a dollar in 1700 would be 63.48.

Here’s a look at how the U.S. dollar’s value has changed since 1970:

  • 1970: 6.71
  • 1980: 3.16
  • 1990: 1.99
  • 2000: 1.51
  • 2010: 1.19 
  • 2020: 1

The dollar’s value has been steadily declining since 1939, when it was valued at 18.73, meaning goods cost nearly 19 times as much as they did in 1700. 

The Statista chart primarily addresses how the dollar has become less valuable in spending power due to inflation. The Federal Reserve established the U.S. Dollar Index (USDX) after it abandoned the gold standard and it’s a better measure of the dollar’s relative value than other currencies.

The index compares the relative value of the U.S. dollar to six major foreign currencies:

  • Japanese yen
  • The euro
  • Canadian dollar
  • Swiss franc
  • British pound
  • Swedish krona

Each currency in the basket is assigned a specific weight reflecting its significance in international trade. The index is calculated by factoring the exchange rates of these currencies against the U.S. dollar and comparing them to a base value of 100.

If the USDX is above 100, it indicates a stronger dollar. A score below 100 indicates a weaker dollar. 

When the USDX was established in 1973, the U.S. dollar had an index score of 108. Its value peaked in March 1985 with a score of 128. However, the index plummeted in the late 1980s and remained under 100 from September 1987 until January 1998. 

The dollar remained strong throughout the early 2000s until the beginning of the recession in 2007. Its index score stayed in the mid-to-high 80s from the late 2000s to early 2015. The dollar was experiencing a strong comeback in the late 2010s until its progress was derailed in the early 2020s.

Capitalize on U.S. Dollar Price Movements

Forex trading offers opportunities to profit from currency fluctuations, including those of the U.S. dollar. However, you need a way to keep up with the latest trends and fluctuations.

FOREX.com provides access to various currency pairs and educational resources to help you navigate this market. It also offers native U.S. dollar analysis tools and additional analytics capabilities via integrations with platforms like TradingView and MetaTrader4 (MT4).

By leveraging these resources, you can actively participate in the forex market and better understand the dollar’s price movements. 

Frequently Asked Questions

Q

What is the value of the U.S. dollar right now?

A

At the time of this writing, the value of the U.S. dollar index was 105.537. However, the value constantly fluctuates throughout the day, so you should refer to financial news sources or currency converter tools for up-to-the-minute rates and valuations.

 

Q

Is the value of the dollar going down?

A

As of November 11, 2024, the U.S. dollar’s year-to-date trend is positive, at 4.05%, indicating that its value has increased compared to this time last year.

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