Qatar National Bank of Qatar, QNB, stressed the existence of a field for a further decline in the value of the US dollar, in the medium and long term, despite the decline in the dollar during the current year, which it described as the strongest during the last half century.
In its weekly report, Qatar National Bank / Qatar Bank attributed this decrease to the decrease in the superiority of the American economic performance, the exaggeration in the evaluation of the dollar, and the tremendous accumulation of unnecessary assets in the United States, suggesting that the optimal organization of currency amendments will require significant global cooperation at the level of the macroeconomic.
The report said there is no market comparable to the foreign exchange market. With a daily trading volume exceeding 7.5 trillion US dollars, the foreign exchange market is the largest and most lifestyle of financial assets in the world. Unlike stocks or bonds, the foreign exchange market operates around the clock five days a week, as major currency pairs are traded throughout continents.
The report pointed out that the sharp decline in the value of the US dollar index represents the worst start of the American currency since 1973, when President Richard Nixon engineered the process of deciphering the US dollar with gold, which led to a significant decrease in the value of the currency. The recent decline in the value of the US dollar index also included all the main currencies within the index basket, namely: the euro, the Japanese yen, the pound sterling, the Canadian dollar, the Swedish Karra, and the Swiss franc.
The report considered that the sharp move and the expansion of the centers of traders may lead to a decline in the US dollar in the short term, likely that the circumstances are prepared for further the value of the US dollar in the medium and long term, based on three main arguments, the first of which is expected that the big gap in the growth between the United States and other major advanced economies significantly during the coming years, which actually reduces the so -called exception American.
New immigration policies and limited financial space indicate more slowdown in the United States. On the other hand, the leading economies in the eurozone, such as Germany, are expected to follow a more flexible financial policy, which increases investment in defense and infrastructure.
As a result, it is expected that the difference in GDP growth between the United States and the eurozone, which was in favor of the United States with an annual average of 220 basis points during the past few years, will narrow to 70 basis points during the period 2025-2027, and this is expected to enhance the strength of the euro against the US dollar, which causes the US dollar index to further decline – where the euro represents 57.6 percent of the basket US dollar index currencies.
Qatar National Bank QNB / in the second argument considered the evaluation of the US dollar that the currency is amounting in its value and needs to be modified. One of the common ways to consider the “values” of currencies is to analyze the likely exchange rates commercially and modified by inflation, i.e. real actual exchange rates, and compare them with their long -term average or historical standards.
This real actual exchange rate measure is more accurate than traditional foreign exchange rates, as changes in trade patterns between countries, in addition to economic imbalances that are manifested in inflation and its differences.
The image of the real actual exchange rates for May 2025 indicates that the US dollar is already the most exaggerated currency in the developed world, with more than 17 percent of its virtual “fair value”. Thus, the currency is expected to adapt to fair prices in the medium term.
The cross -border financial asset centers indicate that the structural balance of global capital allocations may stimulate a large wave of capital out of the United States according to the third argument mentioned by the report.
The United States is currently a large net debtor to the rest of the world, as the net international investment situation is a negative number of 24.6 trillion US dollars. The image also deteriorated sharply, as the net international investment status of the United States developed from a marginal negative number of about 9 percent of GDP at the beginning of the global financial crisis to 88 percent of GDP at the end of last year. This situation indicates that the United States is the country where most global economic imbalances are concentrated.
It appears that this level of mutual exposure began to become annoying to all creditors and debtors, which requires major adjustments. This would require more capital flows from the United States in a process that takes many years, causing additional selling pressure on the US dollar.
