The Chinese yuan has slumped by 2.6% in that time to hit its lowest level against the dollar in 16 years. “Rumors of the US dollar’s demise continue to be greatly exaggerated,” James Athey, investment director at Abrdn, an asset manager, told CNN. By contrast, a Harris victory is expected to bring policy continuity from the Biden administration, under how to start a cryptocurrency exchange: steps and processes which uncertainty on fiscal and tax policy has appeared to correlate to mild dollar weakness.
A so-called “soft landing” — that is, when a central bank successfully lowers inflation without tipping the economy into recession — now looks increasingly likely. “This is a typical story in the currency market, with the Fed at the forefront of the monetary cycle, arbitrage forex software latency hft trading which initially forms months of dollar growth on rate hikes, but then triggers a move in the opposite direction,” the analyst said. “In the last six months, we have seen the quite typical and understandable reversal of the dollar.” For countries that depend on commodity imports, a weaker dollar means they have to pay less for essentials like wheat and crude oil. “I can see two more quarters of US dollar weakness, particularly if it becomes even more clear that the Fed is going to cut interest rates,” Ulrich Leuchtmann, head of foreign exchange research at Commerzbank, told CNN. I don’t think you’re going to have a weakening of the dollar until you have more convergence in growth or in monetary policy.
The Dollar Is Extremely Strong, Pushing Down the World
- The result could have a far-reaching implications for tax and trade policy, as well as economies around the world.
- US equities outperformed global markets last year and are extending gains this year.
- The Chinese yuan has slumped by 2.6% in that time to hit its lowest level against the dollar in 16 years.
- By contrast, a Harris victory is expected to bring policy continuity from the Biden administration, under which uncertainty on fiscal and tax policy has appeared to correlate to mild dollar weakness.
- However, the stock, which has been a darling of Wall Street this year, fell after the news.
Such a fall is likely to put severe depreciation pressure on the rest of emerging markets, in addition to pulling down commodity prices. Such a tightening in global financial conditions raises the risk of negative spillback to the premarket prep stock of the day U.S., which—from China’s perspective—is probably not unwelcome. But American companies with large international operations are taking a hit when they convert foreign sales back into dollars.
The big problem holding back the UK economy
It’s not necessarily bad for other economies because if you have a weaker currency, that should help your exports, and that’s the way the global economy re-balances. However, the strong dollar is not an exogenous shock, it is an endogenous reaction of the market to the fact that the US is doing better than the rest. “As the impact of Hurricane Beryl on economic indicators fades, we expect the Citigroup Economic Surprise Index to rebound in the coming weeks. That should support long-term bond yields, boosting the dollar,” Yardeni explained. The US dollar has weakened in recent weeks as interest rates dropped due to prospects of significant interest rate cuts by the end of the year. But Yardeni believes the market got ahead of itself when it comes to interest rate cuts, and if that’s the case, the US dollar should strengthen.
US Dollar gives up gains from two year highs, closes the week strong
Analysts also acknowledged that challenges do exist to this outlook, such as stubborn inflation, Middle Eastern geopolitical escalations, or the re-election of President Donald Trump, who has voiced plans for anti-China policy. The Brookings Institution is a nonprofit organization based in Washington, D.C. Our mission is to conduct in-depth, nonpartisan research to improve policy and governance at local, national, and global levels. “The strength of the US dollar has been a key feature of the post-pandemic bull market,” Yardeni wrote. Analysts at Bank of America estimated that more than half the rise in the dollar this year could be explained by the Fed’s comparatively aggressive policy alone.
The same is true for the European Union where transportation equipment is concerned. The EU is currently by far the largest exporter of motor vehicles, aircraft, trains, and ships to China (Figure 8). This could turn into a liability if China starts ordering more Boeing aircraft instead of Airbus, for example. In short, a second, more pronounced phase of dollar strength may start once the president-elect is in office and the likelihood of tariffs rises. We compare the rise in the S&P 500 in the days following November 5 to what happened in 2016 (Figure 1). The Russian ruble, perhaps surprisingly, has been one of the best-performing currencies against the dollar this year.
Even in the run-up to tariffs—before they are even implemented—there could be adverse fallout for global markets. Currently, Brazil is the largest food exporter to China by a substantial margin (Figure 7). If China decides to try to head off tariffs by buying more agricultural products from the U.S., this could amount to a negative shock for Brazil as it scrambles to place its products elsewhere.
