A powerful greenback is contractionary for the worldwide financial system

The US greenback worth index towards different world currencies, compiled by the Federal Reserve of Saint Louis, reached its highest degree within the final 20 years on the finish of September, declining this month (Determine 1).

Determine 1 – US Nominal Greenback Worth Index

Strong dollar contractionary Figure 1a

From January to mid-October, the greenback rose 13% towards the euro, 22% towards the Japanese yen and 6% towards rising market currencies. The greenback appreciation was even steeper towards different superior economies than relative to rising market economies. In Q3, a sell-off in nearly all currencies besides the U.S. greenback, Mexico’s peso, and Brazil’s actual occurred (Determine 2).

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