Love That Strong Dollar

By Jonathan Levin – Bloomberg

In reality, today’s dollar strength is mostly a straightforward reflection of interest-rate differentials. With the Federal Reserve expected to keep policy rates high for longer than peers, market pricing finds 10-year US Treasury notes yielding several percentage points more than developed-market counterparts. Add to that the outperformance of the US stock market, and it’s clear that flows have stemmed primarily from bullish profit-seeking, rather than fearful cash-hoarding. You’d probably have to go back to the late 1990s to find another period when the dollar was reliably strong for the right reasons.