The US dollar has been in a world of hurt so far in 2018, continuing the trend seen in preceding 12 months.
The US dollar index, or DXY, has fallen 3.26% so far in January, extending its losses from early 2017 to over 14%.
As seen in the chart below from Westpac, while the DXY has suffered larger monthly declines in the past, the weakness in January is still unusual compared to historic norms.
With just of few days to go, the DXY is on track to record its largest January decline since 1987, and the second-largest fall to start a year going back to 1968.
Robert Rennie, Head of Financial Market Strategy at Westpac, says the start of the year may be a sign of what’s still to come.
“Given this follows a circa 10% fall last year, this now feels like an entrenched trend,” Rennie says.
“2017 and 2018 is so far is looking increasingly like the 2002-2004 period when twin deficit (fiscal and current account) concerns slammed the dollar.
“If history is a guide, this move could have further to go.”