The dollar starts strong
The US currency is gaining against almost all currencies.
Despite all the ominous prophecies that predicted a weak dollar this year, the US currency is still holding up in foreign exchange markets around the world. The widely followed DXY dollar index has risen 2% in the past four weeks. Unlike what was often the case in the past, progress is occurring on a large scale.
In a monthly comparison, the US currency has appreciated against almost all competing currencies. The chart above shows the gains for seventeen of them. The dollar achieved its largest gains against the Norwegian krone and the Australian dollar, which fell by about 4% against the US currency. The (official) ruble exchange rate was holding up better. It remained almost stable.
Reports from the United States support the national currency. The economy hardly shows any signs of weakness. It is holding up better than in many other countries, for example in Europe. Comparing two currency areas is a central element because exchange rates are always relative rates.
This also affects interest rate expectations. In nominal and real terms, interest rates in the United States are sometimes much higher than abroad. The Federal Reserve indicated last week that it wants to keep interest rates unchanged for an extended period of time before cutting them.
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