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Beware the Mighty Dollar

US dollar banknotes at the Ninja Money Exchange, operated by Interbank HD, in the Shinjuku district of Tokyo, Japan. The dollar is emerging as the new foe for risky assets. 

US dollar banknotes at the Ninja Money Exchange, operated by Interbank HD, in the Shinjuku district of Tokyo, Japan. The dollar is emerging as the new foe for risky assets. 

Photographer: Toru Hanai/Bloomberg

There’s a new foe for risk assets disguised as a friend. The mighty dollar is boosting purchasing power for Americans and helping fight inflation. But it can erode profit margins for US companies and sweep investing funds away from the market and into savings. It’s also probably a sign that the global economy is in truly bad shape. 

Financial conditions have loosened lately amid signs the Federal Reserve could achieve a soft landing for the US economy. It’s a great story for American households and businesses. But it must be exasperating for Federal Reserve officials who need tighter conditions to cool inflation. So when central bankers meet in Jackson Hole later this week, Fed Chair Jerome Powell will have a good opportunity to reset market expectations.