Why a Strong U.S. Dollar Is Bad News for Investors

According to the U.S. Dollar Index (opens in new tab), which measures the currency against a number of significant trading partners, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, the worth of the U.S. dollar has risen by nearly 9.3% during the past year. By comparison, the British pound plunged 11.2% over the past year.

“The greenback has gone ballistic,” according to a Barron’s (opens in new tab) piece in late September 2022, as the dollar hovered at a 20-year record high. Nearly every major currency lost value (opens in new tab) against the U.S. dollar throughout 2022 thanks to the Federal Reserve’s campaign to rein in inflation with higher interest rates. The Fed is expected to continue regular rate increases into 2023.

While conventional logic would suggest a rising U.S. dollar bodes well during a period of runaway U.S. inflation, it is bad news for…

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