US Dollar Weakness A 'Symptom Not Cause,' Argues Expert As Economist Hails Devaluation To 'Restore Global Growth'
Rishabh Mishra 1 year ago
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As the U.S. dollar witnessed its largest two-day decline in over two years, an economist argues the importance of devaluation for global growth while another expert explains the weakness to as a symptom and not a cause.
As the U.S. dollar witnessed its largest two-day decline in over two years, an economist argues the importance of devaluation for global growth while another expert explains the weakness to as a symptom and not a cause.
What Happened: The macro strategist at Crescat Capital, Otavio Costa highlighted the dollar’s largest two-day decline in over two years in his latest X post.
While he said that the dollar was the “most overvalued” concerning other fiat currencies, he reiterated that it “needs to be devalued to restore global growth.”
However, according to Aditya Sesh, the founder and managing director at Basiz Fund Services, the weakness in the dollar was a “symptom and not a cause.”
Once again, almost unnoticed, we saw another substantial drop in the dollar.
— Otavio (Tavi) Costa (@TaviCosta) March 6, 2025
In fact, it was the largest two-day decline in over two years.
The dollar remains one of the most overvalued in history relative to other fiat currencies, and in my view, it likely needs to be devalued… https://t.co/SJ8W2gQlsf
Other economists like Peter Schiff said that the plans to form a Bitcoin (CRYPTO: BTC) strategic reserve in the U.S. could be a reason for “dollar’s demise,” saying that “ultimate winner will be gold.”
If Bitcoin's success is predicated on the dollar's failure, if the U.S. is foolish enough to actually create a Bitcoin strategic reserve, this development will accelerate the dollar's demise, potentially benefiting Bitcoin in the short run. But the ultimate winner will be gold.
— Peter Schiff (@PeterSchiff) March 5, 2025
Why It Matters: Sesh said that “it is not surprising that the USD can come under pressure at various points in time,” while highlighting the following developments as the “symptoms”.
- Correction After A Period Of Strength: According to Sesh, the dollar’s recent strong performance against other major currencies makes it susceptible to a natural market correction.
- Fiscal Implications: A “review of public finance in the U.S.,” including cleaning up USAID and the spending cuts by the Department of Government Efficiency, “is a long time, arduous task”.
- Economic Slowdown Signals: Sesh also highlights economic weakness hampering the USD. According to him, declining indicators like the ISM Purchasing Managers Index, particularly the drop in new orders, suggest a potential slowdown in US manufacturing.
- Geopolitical And Infrastructure Burdens: Finally, the dollar’s reserve currency status, along with the need to renovate aging infrastructure, creates substantial financial obligations that can place downward pressure on the currency, according to Sesh.
Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Thursday. SPY decline 0.87% to $577.96 and QQQ was down 1.10% to $496.48, according to Benzinga Pro data.
On Wednesday, the SPY declined 1.07% to $583.06, and the QQQ rose 1.30% to $502.01.
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