Why a stronger US dollar is dangerous
It sets the stage for a nasty new Trump-China clash, among other things
THE US dollar is looking increasingly formidable. As American growth has stayed strong and investors have scaled back bets that the Federal Reserve will cut interest rates, money has flooded into the country’s markets – and the greenback has shot up.
It has risen by 4 per cent this year, measured against a trade-weighted basket of currencies, and the fundamentals point to further appreciation. With a presidential election looming, and both Democrats and Republicans determined to promote American manufacturing, the world is on the verge of a difficult new period of strong-dollar geopolitics.
This situation is made still more difficult by the fact that the currency’s strength reflects weakness elsewhere. By the end of 2023, America’s economy was 8 per cent larger than at the end of 2019. Those of Britain, France, Germany and Japan each grew by less than 2 per cent during the same period.
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