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Published: Jul 29, 2020 5 min read

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The U.S. dollar is not having a good summer. Down around 9% from its March highs, the greenback looks like it’s on its way to having its worst month in nearly a decade.

Sure, that might be bad if you were thinking of booking a vacation abroad, but it could actually be a good thing for your investment portfolio.

First off, why is the dollar weakening? The currency was strong for a while, then the pandemic hit and the Fed cut short-term interest rates to near zero. Low U.S. interest rates tend to weaken the demand for the U.S. dollar as large investors move money abroad to chase higher-yielding assets denominated in foreign currencies.

The dollar managed buck this trend in March. Then investors were willing to overlook lower interest rates in exchange for the dollar's perceived safety as global stock and bond markets seized up amid economic panic over coronavirus lockdowns.