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  • 00:00:05,400 --> 00:00:07,770 There's a big debate raging across Wall Street

  • about the future of the US dollar.

  • Is it finally set to weaken versus its peers?

  • Or will it continue to strengthen in the coming year?

  • Here's a chart of the US trade-weighted dollar.

  • Now this tracks the dollar's value versus the currency

  • of major US trading partners.

  • As you can see here, it has strengthened considerably

  • versus its peers since the beginning of 2018.

  • And it now sits at its highest level in about two decades.

  • It's a surprising move for a few reasons.

  • And the trend looks set to continue,

  • much to the chagrin of President Donald Trump, who

  • has consistently railed against the economic impact

  • of a strong US dollar.

  • Now the first reason has to do with the Federal Reserve.

  • So, a big component as to why the dollar strengthened so much

  • versus its peers in 2018 has to do with the fact

  • that the Federal Reserve was raising interest rates,

  • while other central banks around the rest of the world

  • were keeping their already low rates low,

  • or moving them even lower than that level.

  • What changed was in January, when

  • the Fed made a sharp U-turn in the path

  • of its monetary policy.

  • Six weeks prior we had raised rates

  • for the fourth time in 2018.

  • And in January it said it was actually

  • going to consider cutting interest rates in the face

  • of softening US economic data.

  • And in July, it instituted the first of three 25 basis point

  • cuts to its benchmark policy rate.

  • It moved in July.

  • It moved once again in September.

  • And then it moved once again in October.

  • The only effect the Fed's U-turn had on the dollar

  • was for it to strengthen versus its peers.

  • And this was because the likes of the European Central Bank,

  • the Bank of Japan, were rolling out very aggressive stimulus

  • packages and cutting interest rates.

  • And so that interest rate differential

  • that helped to explain the strengthening of the US

  • dollar versus its peers during 2018 persisted well into 2019.

  • And it looks like it's set to persist again in 2020,

  • given the fact that the Fed has recently

  • said that it's going to put a stop to any additional easing

  • for the time being until it sees bigger deterioration

  • in the economic data.

  • And now that brings us to our second reason.

  • Relative economic growth.

  • Back in 2017, President Trump unveiled

  • a series of tax cuts aimed at turbocharging the US expansion.

  • That helped to buoy the dollar to some degree,

  • but economists warned that the effects of those tax cuts

  • would be short-lived, helping to build the case for a weaker

  • dollar.

  • But that hasn't happened, as you can see in this chart,

  • given the fact that growth around the rest of the world

  • was pretty lacklustre at best.

  • In China, for instance, the growth rate

  • slowed dramatically, despite a series of stimulus measures put

  • in place over recent months.

  • And in Europe's largest economy, Germany,

  • it was on the brink of recession.

  • And so, when you had US growth outpacing

  • that of the rest of the world, it

  • helps to shore up the dollar versus those other currencies.

  • And then there's the ongoing US-China trade war.

  • The US dollar plays a very important role

  • in the global financial system.

  • It serves as a safe haven asset for investors who flock

  • to it during times of turmoil.

  • And that's very much been the case

  • as the trade war between the US and China

  • has escalated over the past 12 months.

  • Now, recent headlines have pointed

  • to some more positive developments on this front.

  • But in the last week, things have taken a turn a bit

  • for the worse.

  • For instance, President Trump recently

  • said that he would be willing to wait

  • until after the presidential election

  • next year to strike any kind of preliminary deal with China.

  • Within the same week, he also raised tariffs

  • on France, Argentina, and Brazil.

  • So these trade tensions that have helped to buoy the dollar

  • haven't gone away.

  • So taking this all together, the trend

  • that has dominated since 2018 of a strong dollar

  • looks set to persist for some time, at least.

  • What it would take to reverse the dollar's fortunes

  • would be a sizable progress on the US-China trade front,

  • as well as a shoring up of growth globally.

  • And that looks to be a tall order.

00:00:05,400 --> 00:00:07,770 There's a big debate raging across Wall Street

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米ドル高トレンドが持続する可能性がある理由 カウントするチャート (Why the strong US dollar trend may persist Charts that Count)

  • 63 2
    洪子雯   に公開 2021 年 01 月 14 日
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