What does a 20-year high in the US dollar mean?
What does a 20-year high in the US dollar mean?
The US dollar rose sharply recently as the risk of a global recession rose, energy prices picked up to push up inflation expectations, coupled with Fed Chairman Powell’s “hawkish” comments at the central bank's annual meeting in Jackson Hole last month. In August, the US dollar index, which measures the US dollar against six major currencies, rose 2.7% from a year earlier. By the end of the foreign exchange market on September 7, the US dollar index closed at 109.8400, still hovering at a near 20-year high. Meanwhile, the “strong dollar” storm also pushed other major currencies to new lows, with the pound, yen and euro depreciating 4.5%, 4.1% and 1.7% respectively against the US dollar in August, by currency.
Experts stated that the trend of the US dollar is closely related to the monetary policy of the US, which is dominated by the interests of the US, making it possible for the Fed to enter a new monetary cycle, and resulting in greater spillover effects on the global economy. In theory, the US dollar should take proper account of the interests of other countries as a public product, but in fact the US often exploits the time lag in the monetary policy cycle with other countries to “harvest” global markets. When the Federal Reserve bailed out the markets through an extremely loose monetary policy due to the COVID-19, it was actually transferring the costs of its own adjustment to other countries.
What does it mean for manufacturing outside the USA?
It is undoubtedly good for other manufacturing, through which other countries will be benefited from exports to the US, as a stronger US dollar means cheaper exports to the US, which is favorable for manufacturers in other countries to consolidate and expand their market share, and means more orders from overseas.
What does it mean for Made in America?
For shoppers around the world looking for top US brands, the strong US dollar means they may end up paying higher prices for these brands unless local dealers try to mitigate the impact of the currency.
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