The Strong Dollar Could Bash the Economy—and It’s Just Getting Started

The headlines are full of scary reports about the dollar’s rise to a 14-year high against a basket of six major currencies. Its strength will hurt U.S. manufacturing while triggering capital flight from emerging markets, economists say. The appreciation “is a real serious noose around the neck of the global economy,” David Beckworth, a senior research fellow at the Mercatus Center at George Mason University in Arlington, Va., said in November.

What’s really alarming, though, is that even though the dollar has jumped 6 percent against the euro and 12 percent against the yen since the U.S. presidential election, it remains well below its historic highs. If its rise to date is causing trouble, imagine how much worse things could get if it went on a serious upward run.