In history, the US dollar has had both strong and weak periods.
The Plaza Accord in 1985 was the first turning point:
During the strong period of the US dollar from 1980 to 1985, the US dollar index rose from 85 to 135, an increase of about 60%, due to the Federal Reserve raising interest rates to over 10% (peaking at 19%).
In 1985, the US dollar index reached a peak, leading to a significant trade deficit in the US (3.6% of GDP) due to the strong dollar. The Plaza Accord forced the appreciation of the Japanese yen and the German mark.
In the five years before the Plaza Accord, Japan had a consecutive trade surplus, making it the world's largest creditor nation with net external assets of nearly $130 billion. Based on purchasing power parity, the reasonable exchange rate for the yen to the dollar should have been 108:1, but the nominal exchange rate in 1985 was only 201:1. Therefore, the yen's appreciation was easily achievable by reducing foreign investments.
Around 1990-1992, the US dollar basically hit bottom, with the index returning to the level of 80. During this time, the US trade deficit also rapidly narrowed, reaching 0% in 1991.
It can be said that the change in US dollar interest rates (accompanied by the appreciation of the yen) was a process of the economic normalization of both the US and Japan.
From 1995 to 2002, the US dollar index rose again to 120:
I believe this was due to the growth of the US economy during this period, which was under the leadership of Reagan. The US computer and internet industries experienced rapid development and reaped the benefits.
It can be seen that during this period, US dollar interest rates were not low, at around 5%. This period also witnessed the Asian financial crisis.
I refer to this period as the golden time for the US.
During the same period, the US trade deficit reached its peak of 5.5% of GDP in 2004.
In 2002, the US dollar index once again declined, likely due to both economic and interest rate decreases leading to the index's fall.
Subsequently, there was the financial crisis in 2008, during which the US dollar index hit a low of 73. In the following years, the US dollar index fluctuated, and by 2014, it had essentially bottomed out and began to rise again.
After 2008, the US dollar index did not continue to decline, as this was a global crisis, with the US faring poorly and Europe and Japan faring even worse.
From 2014 to 2024, the US dollar index rose from 80 to 104:
If I were to guess, the rise of the US dollar index during this period is a process of comparison, with the US economy still doing relatively well, while the economies of Europe and Japan are relatively weak - because the US dollar mainly represents these two.
The US trade deficit reached 4% in 2022.
Differences in governing styles between the Democratic and Republican parties:
From a monetary policy perspective, it seems that there are clear differences in style between the Democratic and Republican parties.
During the period from 1981 to 1993, when the Republicans were in power (Reagan/Bush), the US dollar was weak.
From 1993 to 2001, during the Democratic administration (Clinton), the US dollar was strong.
From 2001 to 2009, under the Republicans (Bush), the US dollar was weak.
From 2009 to 2017, under the Democrats (Obama), the US dollar was strong.
A weak US dollar benefits the domestic manufacturing industry, targeting the working class. A strong US dollar, on the other hand, benefits the upper-middle class and the service industry, targeting urban white-collar workers. This is probably also some minor differences between the two parties.
In addition, the Democratic party's inclination towards war is also related to a strong US dollar, as it attracts capital to the US. In comparison, wars initiated by the Republican party are fewer.
Based on this, it can be inferred that with Trump in office, the US is likely to take the path of a weak US dollar - he has actually explicitly stated this before.
A weak US dollar corresponds to stronger foreign currencies (RMB, Euro, Yen), so there is a chance that domestic consumption will improve.
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