The dollar is expected to post its worst monthly performance of the year! A look at the winners and losers in the currency wars

The dollar is having its worst performance of the year, which is good news for countries that rely on commodity imports and those repaying dollar-denominated debt, but U.S. businesses and consumers may have to pay more for imports.

The dollar index, which measures the greenback's performance against six major currencies, has fallen 3.7 per cent so far in November and is on track for its worst monthly performance of the year. That is good news for countries that rely on commodity imports and those repaying dollar-denominated debt, but US companies and consumers may have to pay more for imports.

The dollar index surged more than 7 per cent between mid-July and early October, as positive US economic data fuelled expectations that the Federal Reserve would keep interest rates high. However, signs in recent weeks that the US economy has begun to slow have convinced investors that the Fed has finished raising interest rates and will soon switch to a rate cut.

Ulrich Leuchtmann, head of FX research at Commerzbank, told CNN, "I can see another two quarters of dollar weakness, especially if it becomes clearer that the Fed will cut rates."

Cameron Willard of the capital markets team at Handelsbanken Bank in Sweden also expects the dollar to continue its steady decline in the first half of next year, but believes it could reverse after the end of the year as geopolitical risks such as uncertainty over the outcome of elections in multiple countries surface.

In times of turmoil, investors see the dollar as a safe haven where their cash will hold value. "I have a hard time seeing a long-term trend of dollar depreciation," Willard told CNN. "In order for that to happen, you need to have a credible alternative... [The dollar] remains the world's reserve currency and the safest currency in the world, and I don't think that's going to change."

Who is the winner?

For countries that rely on commodity imports, a weaker dollar means it is cheaper for them to buy essentials such as wheat and crude oil, which in turn could reduce headline inflation in these economies.

Mark McCormick, global head of FX and emerging markets strategy at TD Securities, said Japan, South Korea, India and many countries that use the euro, for example, rely on commodity imports and would benefit from a falling dollar trend.

American exporters are also expected to benefit as their products are priced lower in other currencies, making them more competitive abroad.

At the same time, Leuchtmann said that a weaker dollar would raise the cost of imported goods in the United States, helping U.S. companies that sell in the domestic market compete with foreign competitors because domestic products are relatively inexpensive.

It is also good news for emerging markets, many of whose debts are denominated in dollars, and a weaker dollar could make it cheaper to service them.

McCormick told CNN that a weaker dollar also bodes well for investment opportunities outside the United States, and that "a weaker dollar provides support to lift all areas."

Who is the loser?

For American consumers, a weaker dollar is not good news. They may have to pay more for imported goods such as French wine or Chinese-made toys, or even when vacationing abroad.

"A weaker dollar has basically made the US a little poorer because they pay more for the goods they import and earn less from exporting," says Mr. Leuchtmann.

But he added that, other things being equal, it would spur inflation, and that the pace of price increases would be influenced by other factors, "I'm sure inflation in the U.S. will fall further, but at a slower pace than it would have been with a strong dollar."

Handelsbanken's Willard pointed to the cooling US labour and housing markets as two factors to keep headline inflation under control, despite rising import prices. "I don't think the Fed is too concerned at this stage."