- Whenever Federal Reserve officials comment about how they favor a policy of having a weak dollar, it can help invite steep declines. This is because public comments from the Fed about support of a weak dollar may mean that are taking action to promote it.
- Many of the world's central banks use the dollar as a key holding in their reserves. When the dollar weakens, countries grow concerned about the value of their holdings. This can spur dollar selling, leading to further declines.
- A growing trade deficit can devalue the dollar. When the deficit widens, the supply of dollars in world markets increases, lowering demand.
- When inflation rises, the dollar can weaken. This is because the demand for various goods and services is strong. To prevent inflation from running away the Federal Reserve will raise interest rates, causing the economy to slow and the dollar to decline.
- During times of crisis, many people will become very pessimistic about the future. At which point they will begin selling dollar-denominated assets and purchasing more tangible assets, such as precious metals, until the uncertainty passes.
