President Donald Trump seems to favor measuring his economic performance by the way in which the U.S. stock market is doing. However, a more revealing and less rosy measure of his economic performance might be coming from the currency markets.

Following an initial bump up in the dollar's value at the end of last year, on the prospect of a Trump presidency, the dollar has lost as much as 10 percent of its value since January 2017, Trump's inauguration. This sharp dollar decline suggests growing doubts on the part of currency traders as to the direction of U.S. economic policy.

The dollar's recent decline is particularly troubling, as it comes at a time when two historically very dollar-supportive factors are in play.

The first is that the Federal Reserve has not only continued to raise interest rates, but has also intimated that it would soon start to reduce the size of its balance sheet. It would do so by not rolling over a significant part of the maturing bonds that it holds in its portfolio. It would also be doing so at a time when the Bank of Japan and the European Central Bank are maintaining their interest rates at extraordinarily low levels, and when they would be continuing with their very aggressive quantitative easing policies. Normally one would have expected a divergent stance of monetary policies between a more restrictive Federal Reserve and the more expansionary central banks abroad to be very dollar supportive.

The second factor that one might have expected to be dollar supportive has been the heightening of global geopolitical risk since Trump assumed office. These have included the ratcheting up of tensions with North Korea, a souring of U.S.-Russian relations, trade tensions with China and renewed problems in the Persian Gulf involving Qatar. In the past, the dollar has benefited from global geopolitical and economic uncertainty since at such times of uncertainty global investors have tended to seek safety by buying U.S. Treasuries.

The fact that, far from strengthening, the dollar has lost considerable value at a time when it might have been expected to rise could be signaling that investors are souring on the U.S. as a safe haven in times of global turmoil. That in turn could be signaling investor concern about the disorderly approach of the new administration to economic policy management, and it could also be reflecting investor disappointment about the seeming inability of the new administration to implement its promised tax reform and increased infrastructural spending.

Contrary to what Trump might believe, a weaker dollar is not in the U.S. economic interest. This would be especially the case if its weakness were associated with the dollar's loss of status as the world's pre-eminent safe-haven currency. No longer would the U.S. be able to enjoy what French President Charles de Gaulle once dubbed as its "exorbitant privilege." That is to say, no longer would ample foreign capital flows to the U.S. allow it to consume more than it produced on a continuous basis.

If foreign capital flows to the U.S. were indeed to continue slowing, the country would be forced to tighten its belt to reduce its trade deficit. If that were to be achieved without stoking inflation, the country would need to have a more disciplined budget policy, while the Fed would need to pursue a more restrictive monetary policy than would otherwise be the case.