U.S. Dollar Continues its Lengthy Slump on New Inflation Data
A recent update from the Consumer Price Index (CPI) revealed a more inflated United States dollar than many analysts had predicted. As a result, the U.S. Dollar Index (DXY), which measures the strength of the dollar against six currencies whose nations are considered key trade partners, surrendered gains from early February as it attempted to recover from three-year lows. DXY now floats between 88.00 and 90.00—below its 200-day moving average of 93.69 and 50-day moving average of 91.37—after a turbulent few years of fluctuation between 92.00 and 103.00 (figures retrieved from tradingview.com).
A waning U.S. dollar offers new opportunities to investigate alternative IRA investments more closely. Let’s examine three key ways a weaker greenback can impact your retirement strategy and encourage new considerations for self-directed IRA investing:
- Per marketwatch.com, anticipated interest rate increases on federally issued bonds may come to fruition as a measure of controlling inflation. Higher interest rates may stoke volatility on Wall Street and prompt a more exaggerated market correction as investors pull out of stocks and gravitate toward bonds. The Bottom Line – A retirement portfolio situated in stocks and mutual funds could be in for a bumpy ride as the Federal Reserve attempts to curb inflation.
- A weak dollar tends to inspire confidence in physical assets like precious metals. According to www.bullionvalues.org, IRA-eligible precious metals prices have all spiked in recent days with gold returning to $1,350 per ounce. The Bottom Line – Precious metals can provide a hedge for other investment interests as inflation throws the publicly traded markets for a loop.
- Foreign imports become more expensive as the dollar holds less purchasing power in other countries. Furthermore, U.S. dollars invested in overseas business interests have to “work harder” to produce returns. Imagine spending one dollar for an apple in the United States and spending one euro for the same apple in Germany; this would be an even 1-for-1 exchange in terms of currency. If, however, the dollar is only worth half of a euro, that same one-euro apple will cost two U.S. dollars. If you run an American business in Germany (say, apple cider production) that relies on those apples, your purchasing power will be greatly diminished and your profit margins are likely to suffer. The Bottom Line – Your self-directed IRA can acquire private equity in smaller companies that stand to benefit from conducting business domestically.
Earning potential exists at all times, even as the dollars in our pockets continue to lose value. Understanding your spectrum of choices can help you achieve the highest possible degree of retirement success amid concerning economic conditions. For more information about your alternative investment options, please don’t hesitate to contact New Direction IRA.
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