America’s strong dollar: Would a Trump presidency weaken it?
The United States’ dollar has strengthened sharply in recent months, and against Asian currencies in particular. A rising crescendo of apocalyptic financial talk threatens to spook markets. The Japanese yen, for example, appears to be on the verge of collapse.
China may feel compelled to devalue its currency, with damaging consequences for itself and the global economy. So, can anything be done to head off the dollar’s strength, and even if something can be done, should it? First, the facts. The Japanese yen has fallen dramatically, reaching ¥160 to the dollar at the end of April, down 13% since the start of the year and more than 50% since the start of 2021.
The South Korean won is down by about 10% against the dollar since the beginning of the year. And the Indonesian rupiah recently fell to a four-year low against the greenback. But these Asian currencies are not typical.
In fact, the broad nominal dollar index, which measures the dollar’s value against a basket of other currencies, is up by less than 3% since the start of 2023. Moreover, the dollar’s strength is not a sign of market dysfunction. It reflects the fact that the United States has performed better economically than other parts of the world.
Rapid US growth creates expectations of slow US disinflation. Hence the US Federal Reserve Board is apt to keep interest rates high, or at least to disappoint hopes for multiple rate cuts this year. Meanwhile, weaker-than-expected growth elsewhere means that other central banks have less reason to worry about inflation, which makes it correspondingly more likely that they will cut policy rates of interest.
Read more on livemint.com
