hompage
  • Banking
    Best Products
    • Savings Accounts
    • Money Market Accounts
    • CD Rates
    • Checking Accounts
    Calculators
    • Compound Interest Calculator
    • Savings Calculator
    • CD Calculator
    • Retirement Calculator
    • See All Calculators
    Popular Reviews
    • Bank of America
    • Capital One 360
    • Chase
    • Citibank
    • Marcus Goldman Sachs
    Read & Learn
    • America's Best Rates
    • Bank Fees Survey
  • Investing
    Best Products
    • Best Money Investment Options
    • Best Brokerages
    • Best Robo Advisors
    Calculators
    • Investment Calculator
    • Compound Interest Calculator
    • Retirement Calculator
    Popular Reviews
    • Ally Invest
    • Merill Edge
    • TD Ameritrade
    Read & Learn
    • Investment Quiz
    • Tax Preparation Fees
  • Personal Loans
    Best Products
    • Best Personal Loans
    • Debt Consolidation Loan
    • Home Improvement Loan
    Calculators & Guides
    • Personal Loan Calculator
    • Boat Loan Calculator
    • Guide to Personal Loans
    Popular Reviews
    • Best Egg Review
    • LendingClub Review
    • Lightstream Review
    • Payoff Review
    • Prosper Review
    • SoFi Review
    • Upgrade Review
    • Wells Fargo Review
  • Credit Cards
    Best Cards
    • Best Credit Cards of 2023
    • Best Balance Transfer Credit Cards
    • Best Business Credit Cards
    • Best Cash Back Credit Cards
    • Best Rewards Credit Cards
    • Best Secured Credit Cards
    • Best Student Credit Cards
    • Best Travel Credit Cards
    Calculators
    • Credit Card Interest Calculator
    • Debt Payoff Calculator
Best Products
  • Savings Accounts
  • Money Market Accounts
  • CD Rates
  • Checking Accounts
Calculators
  • Compound Interest Calculator
  • Savings Calculator
  • CD Calculator
  • Retirement Calculator
  • See All Calculators
Popular Reviews
  • Bank of America
  • Capital One 360
  • Chase
  • Citibank
  • Marcus Goldman Sachs
Read & Learn
  • America's Best Rates
  • Bank Fees Survey
Best Products
  • Best Money Investment Options
  • Best Brokerages
  • Best Robo Advisors
Calculators
  • Investment Calculator
  • Compound Interest Calculator
  • Retirement Calculator
Popular Reviews
  • Ally Invest
  • Merill Edge
  • TD Ameritrade
Read & Learn
  • Investment Quiz
  • Tax Preparation Fees
Best Products
  • Best Personal Loans
  • Debt Consolidation Loan
  • Home Improvement Loan
Calculators & Guides
  • Personal Loan Calculator
  • Boat Loan Calculator
  • Guide to Personal Loans
Popular Reviews
  • Best Egg Review
  • LendingClub Review
  • Lightstream Review
  • Payoff Review
  • Prosper Review
  • SoFi Review
  • Upgrade Review
  • Wells Fargo Review
Best Cards
  • Best Credit Cards of 2023
  • Best Balance Transfer Credit Cards
  • Best Business Credit Cards
  • Best Cash Back Credit Cards
  • Best Rewards Credit Cards
  • Best Secured Credit Cards
  • Best Student Credit Cards
  • Best Travel Credit Cards
Calculators
  • Credit Card Interest Calculator
  • Debt Payoff Calculator
    Ad Disclosure
    Compare MMA Rates
Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all account options available. Click here to go to our Editorial and UGC disclosure. *APY (Annual Percentage Yield).
Please enter the text to be searched

What The Weakening Dollar Means to You

With bank rates near zero, savers can ill afford a new wave of inflation. Read why the weakening dollar poses a new threat to savers and investors.
mm
By Richard Barrington

Last updated: October 17, 2021
Our articles, research studies, tools, and reviews maintain strict editorial integrity; however, we may be compensated when you click on or are approved for offers from our partners.

The U.S. dollar recently fell to its lowest level in six weeks. Unless you are about to travel outside the country, you might not immediately notice the impact of a weakening dollar, but if it continues to slide it could have a profound effect on your investments and your budget.

A weak dollar can lead to inflation, which would be especially damaging to savings at a time when bank rates are extraordinarily low. This may be a good time to consider some ways of protecting yourself against a weakening U.S. dollar.

Why the dollar is slipping

The value of the dollar has slipped in recent weeks when measured against a broad spectrum of foreign currencies. Currencies can be hard to track — it’s a little like judging someone else’s speed when you are in a moving car. However, when the dollar is falling relative to a variety of other currencies rather than just one, it is fair to say this is a sign of weakness in the dollar rather than strength in all those other currencies. Notably, prices on commodities such as gold and oil have also been rising — another sign that the value of the dollar is weakening.

The root cause of the dollar’s woes are concerns about the U.S. economy. One after another, reports on economic indicators have been disappointing so far this year. Among other things, the struggling economy is leading investors to speculate on whether the Federal Reserve will have to rethink its monetary policy.

Not-so-easy money

In each of its last two meetings, the Fed has announced that it is beginning to tighten monetary policy by cutting back on its quantitative easing program. The thought was that the economy was strong enough to survive without that artificial stimulus. However, if growth continues to sputter, the Fed may have second thoughts about scaling back quantitative easing.

The problem is that while monetary easing is often discussed as if it were a cost-free solution, it is not. By potentially undermining the creditworthiness of the U.S. government, it can erode the value of the dollar. The price of a weaker dollar is ultimately paid by everyone in the U.S., in the form of higher inflation.

An investor’s choices

What is an investor to do in this situation? It is hard to find a safe harbor when inflation hits. Already, savings account and money market rates are not keeping up with inflation, and if price increases accelerate, bond yields will fall behind as well.

Investing in foreign currencies is one way to hedge against the weakening dollar, though currency investments are more volatile than what most people want from a risk management strategy. Foreign stocks are another possibility. They can benefit from the relative weakness of the dollar, while also tying your portfolio to more than just the U.S. economy. Closer to home, U.S. stocks that are heavy exporters can also be a way to hedge against a falling dollar. With their expenses in dollars and revenues in foreign currencies, exporters can be on the right side of a weaker domestic currency.

A side benefit to investing in foreign stocks is that it improves your diversification, and in the absence of any safe bets, spreading your money around may be the best thing you can do to manage risk.

Frequently Asked Questions

Q: Between the financial crisis a few years ago and all the talk about the dollar falling now, I’m getting nervous about my bank accounts. I have some money market accounts and CDs, but I’m wondering if there is a safer place for my money — perhaps gold?

A: The difficulties of the past few years haven’t just raised concerns about jobs and economic growth the way recessions usually do — they’ve made people worry about the basic stability of the financial system. Some nervousness is understandable, but before you cash in your money market accounts and CDs, there are a couple things to bear in mind:

  • Your deposits should be safe as long as you are within FDIC insurance limits. The limit is generally $250,000 per depositor per bank, but if you can get more coverage by diversifying among banks, or if some of your deposits are in joint accounts or IRAs. If things got to the point of collapse where the US government could no longer fulfill its responsibilities to depositors, it’s hard to see an alternative that would be safe anyway.
  • Gold is hardly the safe harbor people take it for. Certainly, gold is a radically different investment than deposit accounts, so it shouldn’t really be considered as a safe alternative. Gold can fluctuate widely in value, and it pays no interest. Gold has been hot for several years now, which should make you wary about jumping in at current prices. Even if gold just flattens out, without income it becomes dead money, losing ground to inflation. With the best money market rates above 1.5 percent, and the best CD rates around 3 percent if you are willing to go long, you could do better by sticking with deposit accounts.

In short, if you are worried about the financial system and the economy, FDIC-insured deposits are probably the safest place for your money.

(Ed. note: As this article went to press, the dollar had recovered to mid-February levels after investors sought safer assets amid tensions in Ukraine.)

About Author
mm
Richard Barrington
Richard Barrington has been a Senior Financial Analyst for MoneyRates. He has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications. Richard has over 30 years of experience in financial services. He has earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the “CFA Institute”).
See Best MMA Rates 2021
top-reviews RELATED ARTICLES
When Opening Multiple Money Market Accounts Is A Smart Move
By Richard Barrington
IRA Money Market Accounts for Retirement Savings
BY Richard Barrington
2019 Outlook - 6 Factors Affecting Savings & Money Market Rates
BY Richard Barrington
Money Market Accounts Vs. Savings Accounts
BY Richard Barrington
Batter Up! 9 'Players' for Your Investment Line-Up
BY Richard Barrington
Home-Field Advantage - 7 Reasons to Favor US Stocks
BY Richard Barrington
7 Straightforward Rules for Asset Allocation
BY Richard Barrington

Home » money-market-account » What The Weakening Dollar Means to You

hompage
  • About Us
  • Contact Us
  • Privacy Notice
  • Terms of Service
2023 MoneyRates
Twitter
Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all account options available. *APY (Annual Percentage Yield).
Editorial Disclosure: This content is not provided or commissioned by the bank advertiser. Opinions expressed here are author's alone, not those of the bank advertiser, and have not been reviewed, approved or otherwise endorsed by the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program. To learn more about our approach to content and product assessments, visit our Editorial Policy and Product Assessment Methodology page.
UGC Disclosure: These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
Information from third party sources deemed reliable but not guaranteed. Disclaimer: Because rates and offers from advertisers shown on this website change frequently, please visit referenced sites for current information. This website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.
Do Not Sell or Share My Personal Information
2023 MoneyRates