Global Perspectives: The Stable Dollar Amid Tumultuous Headlines

Foreign Exchange - Global Perspectives
The Stable Dollar Amid Tumultuous Headlines
The Stable Dollar Amid Tumultuous Headlines
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February has started out with a lot of noise in the markets. Equity markets around the world have continued a bull run after a disastrous few months to close 2018. Our favorite indicator — the U.S. dollar — seems to have been in the shadow compared to everything else that is going on.
The most widely watched, trade-weighted dollar index – DXY – has slowly risen each day this month and is back at levels we last saw towards the end of 2018. The story of the dollar reflects what we have been discussing in the whole global economy. While the dollar's drop in January followed market repricing of expectations of short-term interest rates in the U.S. (such as the seeming disappearance of rate hikes and hushed whispers of possible rate cuts), the rise in the dollar's value in February is also due to other major economies being revealed as weaker than previously expected.
Interestingly, the dollar has performed better against developed market currencies than emerging market currencies, reflecting the divergent performance in growth momentum. Developed market economies outside of the U.S. have come out with their own dovish tones as they face aging economies, immigrant issues and geopolitical uncertainties putting a halt on economic growth.
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