The Dollar Is a Haven in Sea of Uncertainty
Whether it’s trade wars or the Fed, the greenback’s pre-eminent status among global currencies should remain intact.
The dollar’s getting stronger.
Photographer: Chung Sung-Jun/Getty Images AsiaPacThe dollar has gained about 30 percent against a basket of other major currencies since the start of August 2011, which just happens to be the month that S&P stripped the U.S. of its AAA credit rating. Putting aside the debate over whether credit ratings actually matter for the world’s primary reserve currency, the question at the moment is whether the greenback can keep strengthening. The answer is an unequivocal yes.
In fact, the dollar is in for a number of years of substantial increases. Consider that the currency’s recent rally as measured by the U.S. Dollar Index came after a 52 percent slide that started in March 1985. Put another way, it’s still 37 percent below that peak 33 years ago. More fundamentally, the dollar is one of the few havens in a sea of global uncertainty. That’s true even if the U.S. institutes the troubles.