Continuous Dollar Growth Increases Intervention Bets
It is anticipated that the US dollar will continue to gain ground, fueling suspicion that authorities will conduct unprecedented market interventions to increase the value of the currencies that lost out in the deal. Even while the US has taken steps to quell concerns of such a move, many experts anticipate a coordinated effort by powerful nations to devalue the dollar. They also anticipate Japan to boost up its expensive efforts to support the yen on its own, without assistance from others.
As foreign investors take advantage of higher US interest rates or seek refuge from market volatility, notably in the crisis-ridden UK and developing economies, the value of the dollar has increased. By increasing the cost of imported food and fuel, the rally is highlighting the financial struggles of several countries throughout the world. In an effort to slow the rise in consumer spending, many central banks have begun hiking interest rates. This is adding to their pressure.
By decreasing the value of money earned abroad, the unstoppable dollar also has a negative impact on the profits of American corporations. The Federal Reserve has tightened policy in the most hostile manner since the mid-1980s, which has increased US bond yields and driven up the currency. On the other side, worries about the UK's significant tax-cut proposals caused the pound to crash to a historic low in late September.
The government of President Joe Biden has no motivation to weaken the USD because doing so might increase US inflationary pressures. When the UK, France, West Germany, Japan, and the US came to an agreement to act in 1980s, it was the last time there was a significant round of coordinated action to lower the dollar.
We already have a currency crisis between the pound and the euro, and if it persists, we may eventually require central bank supervision. Consequently, some stock investors are also suffering as a result of the high dollar.