US Dollar’s Extended Reign Delivers Stark Wake-Up Call for Markets

The world’s financial markets are encountering a force they didn’t bet on for 2024: A strong dollar is back and looks set to stay.

Having entered the year predicting the greenback would decline, investors have been forced into a rethink by a red-hot US economy and sticky inflation requiring the Federal Reserve to hold off cutting interest rates.

With the International Monetary Fund predicting output stateside will grow at twice the clip of its Group-of-Seven peers, talk of “US exceptionalism” is rife and supporting stocks and bond yields, adding to the dollar’s appeal. And in a time of mounting geopolitical strife, the currency still stands as the ultimate currency haven.

A Bloomberg dollar index has gained more than 4% this year, reflecting advances against all major developed and emerging-market counterparts. One popular gauge of trader sentiment pointed bearish at the start of the year, but has since flipped to become the most bullish since 2019, according to data from the Commodity Futures Trading Commission.

bullish dollar