Dollar Weakness After Presidential Elections

November 11, 2009

An element of the dollar’s depreciation in 2009 to bear in mind is that we are in a post-presidential election year.  The dollar has taken some pretty big tumbles in such years before.

It fell 31.5% from 3.22 marks at the time of the 1972 reelection of Richard Nixon to 2.20 by early July 1973.

It ended 1977 at 2.11 marks, 12.2% weaker than when Jimmy Carter was elected in 1976 and went on to depreciate by a total of 29% by end-October 1978.

The dollar performed very well in the early 1980s, climbing 52% against the mark between the initial election of Ronald Reagan in November 1980 and his reelection four years later.  Reagan switched Treasury secretaries at the start of his second term, resulting in a U-turn on dollar policy.  From late February 1985 to the end of that year, the dollar lost 29.5% against the mark.

During 1989,  year one of the first Bush presidency, the buck began robustly as it had done in 1985 but fell by 17% against the mark between mid-June and yearend.

The dollar fell some 20% from 126 yen on the first full day of the Clinton presidency to a low in the summer of 1993 of JPY 100.4.

The dollar has suffered in years following a presidential election under both Republicans and Democrats.  It does not do this always.  Notably, it rose strongly in the first halves of 1981 and 1989 and in the first two months of 1985.  The one consistency is that the U.S. currency has stumbled pretty significantly early on whenever a Democrat was elected.  It did so generally under Carter, specifically against the yen under Clinton, and now generally again under Obama.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.



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