Why the Dollar Won't Regain Its Past Strength

The US Dollar has been declining like it did in 2005 but experts believe that it probably wouldn’t regain its past strength.

The dollar is declining becase the current account deficit is increasing. Broadly speaking, the deficit measures how much more the U.S. spends on goods and services from abroad than it earns on the goods and services it sells.

Increasing current account deficit, will force the US to borrow money from outside, by writing IOUs. Borrowing money from outside will decline the dollar.

What's different now is that the U.S. economy is looking weaker than many of its counterparts abroad. US productivity is declining as compared to the emerging markets. So now investing in the US (i.e. lend US money) is not that attractive

Hence dollar will become cheaper, and US interest rates will go up; reducing the delta of interest rates with the emerging markets

-Subir