King Dollar's Softening Is Good News for Nearly Everyone
Economies in Europe, Asia and emerging markets will all benefit as the Fed’s new interest-rate story takes hold.
Peak dollar? The US won Olympic gold in basketball as the greenback’s hold on global markets began to slip.
Photographer: DAMIEN MEYER/AFPHas the tide turned decisively against King Dollar? A fall of around 5% in the greenback versus major currencies in the past two months, pushing the dollar index to a 13-month low, suggests its post-pandemic surge has meaningfully faltered.
This comes hand-in-hand with a change in mood music from the Federal Reserve, which Chair Jerome Powell made plain at Jackson Hole last week: Interest rates have been kept high for long enough. The question at its next meeting on Sept. 18 is how big the first cut might be. Interest-rate differentials, and the implicit cost of hedging dollar exposure, aren't the only rationales for determining relative currency performance but they’re the dominant influences.