When Will the US Dollar Rebound?

Sagging EconomyHaving watched the US Dollar decline dramatically over the last few years, the nation’s purchasing power as a whole has been reaching extremely low levels. However, as the bottom of the drop seems to still be nowhere in sight, economists are continuing to predict a return to value over the next few years.

Mainly as a product of the continuing escalation of the European crisis, combined with the continuing recovery of the US economy, investors and savers are both confident in the eventual return of the USD as a valuable currency in the world market. Unfortunately, without any real indication of exactly how long the wait will be, frustrated savers across the country have been collectively asking about just how long the wait for the rebound will be.

The first key turning point for the USD that investors are waiting on is the full recovery of the American economy. While companies themselves continue to perform at reasonable levels, the lack of employment continues to plague the nation. Without people working in gainful employment with reasonable consistency, it is impossible for the currency to fully recover, because of the way in which it serves as an indicator of the nation’s ability to produce wealth.

By returning to its status as a wealth-producing nation, the USA can expect to see an increase in its currency value. Specifically, this growth will likely stem from increased purchasing from internal investors, due to the preference to invest in familiar assets.

The second main contingency that the USD is waiting on is the outcomes of the European crisis, with the resolution of the Greek situation being of particular note. Because of the way in which the Euro-zone is still in a state of uncertainty, as opposed to a full blown state of collapse, investors are still holding on to their assets in the hopes of a resolution.

However, as the risk of collapse continues to escalate, it is reasonable to assume that a capital flight will take place, resulting in funds leaving the Euro-zone in favor of more stable currencies. In the event that this flight should take place, the USD is generally expected to appreciate as a stable-alternative. Given that the USD is fairly removed from Europe both politically and economically, the rationality does hold as reasonable.

With both the Greek and US economies demonstrating significant amounts of influence over the value of the USD, it is finally important to remember how it is that gold has been acting as a currency of last resort globally. Because of the way in which gold has appreciated in worth over the last few years, investors need to remember that there is always the possibility of an exit from the gold currency resulting in a re-inflation of the value of the USD, as the main currency alternative to gold.