Dollar Puzzle May Be Solved in Global Credit Merry-Go-Round
- Faster global growth encouraging overseas borrowing in dollars
- Greenback valuation negatively correlated with global cycle
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The dollar’s status as the world’s most popular funding currency is stronger than ever, helping to push the greenback lower even in the face of bullish drivers such as the U.S. tax overhaul and higher short-term bond yields.
A buoyant global economy is encouraging borrowing in dollars by overseas corporations and governments, overwhelming the domestic forces, according to Morgan Stanley. That suggests the dollar’s losing streak is set to continue in 2018 as worldwide growth picks up steam. The U.S. currency dropped 9.9 percent in 2017, its worst performance in more than a decade, and has started the new year on a losing streak.