The recent US dollar volatility has led to two completely different reactions between economists and market participants.
London … News Time
The recent US dollar volatility has led to two completely different reactions between economists and market participants, some see it as part of better economic performance in the future, and others fear it will be disrupted. Investors and companies can now partially take steps to protect themselves from disruption, and such an ambiguous strategy guarantees maximum results for extreme results in many fields. The stability of the dollar is not surprising, given the three major factors attracting foreign capital to the US, a domestic economy that has permanently outperformed other developed countries; second, a stock market that overtook others. And the third is unsecured productivity gains for fixed-income investors. Investors believe that in the weakening of today’s global economic environment, only the United States is able to maintain long-term value in its currency. European and emerging economies fear that the continued stability of their currencies will further reduce their growth. Contradictory ideas about what happens next also explain that for some people the stable dollar is part of a restructuring of the balance of the global economy. It helps the economies more vulnerable to trade and more affected by the global trade war, by promoting more independent weak economies so that they can reach the highest performance of the US.
According to the Financial Times, the volatile dollar presents risks, at the top of a long trade war launched by the Trump administration as efforts to end unfair trade practices against the United States are at risk. It jeopardized the Federal Reserve for further political attacks, which undermined the Federal Reserve’s credibility and its associated market confidence. It can destabilize emerging markets with large currency currencies, which includes what economists call real sin, in countries that have borrowed big dollars. But generate a larger share of the revenue for interest and use currencies lower than the dollar to pay on time.
The three factors mentioned above weaken growth, market volatility and tighten financial position. They will come at a difficult time for the global economy. Global economic activity and trade are slow, Europe may be the victim of economic crisis next year, central banks are slowing down on policy, emerging markets have little if any stories of improvement. The reliance on migration, first and foremost on American politics, has the potential to tilt in favor of a better outcome. Facilitating the international playground on trade, especially with China but also with other countries, this is one of the few issues that command wide political support in the United States. Not everyone agrees on the procedure but most are united in adhering to better trade terms for the United States. This increases the likelihood of using currency policy as a weapon, giving the US more timely incentives even though only Europe and China can partially counter the threat, especially when there have been complaints of prolonged intellectual property theft and the forced transfer of technology to China.
As part of re-balancing policies in favor of structural terms and fiscal stimulus, the European Central Bank may also gradually assist in the gradual removal of free use of unconventional monetary policy to influence asset markets. This has been a disappointing pursuit of better overall economic results, and is becoming increasingly contagious. The double result associated with the stability of the dollar is an example of a remarkable new situation that is working not only in economics and financial matters, but also on institutional, political and social issues. This reduces the chances for a continuation of the situation, and creates greater chances for extreme consequences on both sides of the situation. This trend is gaining more prominence, but not as much as it deserves, perhaps not surprisingly, there are a number of behavioral reasons that we oppose to move out of our comfort zones.
Contradictory claims about stable dollar results are a long list of the unusual uncertainties facing the current weak global economy. Instead of ignoring the high potential for extreme results, companies and investors need to counter this in their strategic planning. Thinking about it is like minimizing future misery.
