What are signs we can look at to see if the value of the dollar will rise or fall?

Question

What are signs we can look at to see if the value of the dollar will rise or fall?

I'm no economist, so I'd appreciate a little help in understanding what indicators there are to look at to see why/how the value of dollar has changed, relative to other currencies.

After all, the more the dollar slides, the more it hurts us consumers and us tourists.

thanks!!!!

@Maria - I disagree that the "stock market" is any sort of indicator. For example, Recently, all the indexes tracking the value of the stock market went up around 16%. There was no such correlation with the relative value of the dollar. I dont think its a "feel" or a "mood" either - I think there are probably hard, tangeable indicators to look at, and I would like to know what they are. Like the interest rate set by the Feds, per se.

thx everyone!!!

Answer 1

burton malkiel's 'a random walk down wall street' demonstrates that in the very short term (hours and weeks) it is impossible to meaningfully predict the movements of stock values, commodity prices, or exchange rates in any freely moving market.

in the medium term (weeks and months) it seems very likely that the ongoing crisis of property prices in the us will continue to force the dollar gently down. from what i see mortgages are still being aggressively marketed in the us, and to poor-risk borrowers. for as long as this trend continues the currencies of countries with more responsible attitudes to mortgage-lending and / or less of a fixation on realty ownership will tend to strengthen against the dollar.

in the long term (years) the american economy needs to outperform the majority of other world economies, if only to offset fears about the breathtaking levels of national debt the us is currently running. if there ever were a crisis of confidence in american industrial muscle (as there was in 1929) american levels of personal and national debt would turn the panic into a crash in less than no time. (this is what happened before).

of the major world trading currencies i'd say the dollar is looking about the roughest just now. but of course it still looks a heap better than any currency which is not internationally traded (even the zimbabwe dollar).

Answer 2

Its all about trends and global events. The trend right now has been, and will remain for a while that the value of the dollar is decreasing. In 1950 you could get a candy bar for 5 cents, now they are almost 75 cents. Inflation is a steady force. However, global events can change the value of a dollar in a day. Such as Hurricane Katrina. that affected the nation's economy and made gas prices go skyhigh, thus making the value of the dollar less.

Answer 3

Us inflation rate up vs international ave - dollar down
Us real interest rates down vs international ave - dollar down
US trade deficit up - dollar down

The value of the dollar is determined by the capital flows between countries which is both investment and trade and depends on the willingness of people to hold dollars. Our trade deficits have been supported by foreign investment in the US. When the US no longer looks like the best place to invest money, the dollars will fall ( making exports cheaper and imports more expensive) until the trade deficit is smaller and capital flows are in balance again.

Answer 4

The stock market, the appreciation of other country's currency in terms of dollars, Property values, GDP during a fiscal year, inflation during the year... all these are the factors to estimate the rise or fall in the value of a currency.