King Dollar Risks Becoming Greenback the Bully

When does a strong dollar become too strong? “Right now” would be the cry of most emerging-market currencies, not to mention policymakers in Japan. Even the European Central Bank says it’s paying attention to the foreign exchange market.

king dollar

The relentless rise of Treasury yields is translating directly into dollar strength, laying waste to the value of other currencies. It’s not a crisis yet; but trying to call a top is futile, and the risk of something breaking is increasing. As the US economy becomes ever more internally strong and self-obsessed, emerging-market economies are likely to suffer first and most.

All eyes are on the Federal Reserve as the omnipotence of its economy leaves the US central bank in an invidious position, as evidence of an economic slowdown and an accompanying slowdown in inflation proves hard to find. The dollar remains oddly impervious to the US government’s burgeoning debt load, widening deficits or potential political instability accompanying the upcoming presidential election. Amid increased geopolitical concerns it remains the preferred choice for investors to park cash safely at yields of more than 5%, and is also the avenue for speculating on the latest tech craze in US equities.