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Leading Indicator: The Value Of The Dollar

May 02, 2022 6:54 PM ETFXE, EUO, ULE, EUFX, FXB, UUP, USDU, UDN14 Comments
John M. Mason profile picture
John M. Mason


  • The value of the U.S. dollar continues to get stronger as the Federal Reserve continues to lead other central banks in raising its policy rate of interest.
  • For the last year, the value of the U.S. dollar has been rising, and, as things currently look, it seems as if the value of the dollar will continue rising.
  • Can the value of the dollar continue to rise over the next six months, the next year, or beyond?
  • Something is going to have to change.

Global connection

piranka/E+ via Getty Images

Look at the value of the current value of the U.S. dollar.

Today, it took less than $1.0500 to purchase one euro.

Also, it took less than $1.2500 to purchase one British pound.

It has

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (14)

It is just the privilege of being the king of the jungle. Same script after the 2008 financial crisis. Coordinated manipulations of G7 central banks that push up the dollar and sends global liquidity to support painless, recession-free US recovery first. After that our allies get to share some scraps, and (most of) rest of world gets to hold the bag.
I am more interested on what happens next to the dollar in a couple of years as inflation and higher rates will very likely cause a recession. As we then reduce rates to zero, the dollar will get crushed. If they calculate inflation the same as the 1980's we would show the true 16% inflation rate. Consumer is pending is 68% of the economy which will result in economic problems. Markets start pricing this in 6 to 12 months in advance. Often it begins with elevated volatility as the market grinds lower. The snapshot right now of the dollar strength which likely continues in the short term is obvious. In a year or so a whole new trend will likely occur.
josephaoppenheim profile picture
The Fed is doing fine. Employment is also a mandate of the Fed and employment has likely been better, near record low unemployment and record high job openings.

As far as inflation, much is good inflation, like of the wage increases, the highest % increases are with low wage workers, plus, so far, most well run companies have been able to pass on higher costs.

Of the bad inflation, some is transitional, like supply chains, and some is due to the moral fight for freedom in Ukraine. And the Fed has already talked up most rates.

Generally, it’s wise to have a strong dollar. It preserves the reserve currency status of the dollar. As for trade, most well run US multinational companies have operations abroad and can mitigate currency headwinds.

This is the 4th industrial revolution - digitization, and like all such revolutions, some will be hurt with “creative destruction.”

As far as inflation, much is good inflation, like of the wage increases, the highest % increases are with low wage workers, plus, so far, most well run companies have been able to pass on higher costs.

Uh, Ok.

Inflation 40 year high: CPI March 2022 hits 8.5% annually.
M Plaut profile picture
After Russian assets were seized so quickly and so thoroughly, other countries will be more wary of keeping their savings in the US in dollars. This is certainly true of China, but will also apply to almost everyone to some extent.
Well, you can't say the FED is behind the curve so MUST tighten faster, but no no, Must Not tighten faster because the dollar will be too strong. Have to make up your mind.
sethmcs profile picture
What's next? S&P misses earnings badly due to strong dollar. Market takes next leg lower and recession fears increase.
Foreign owners of US assets are seeing currency gains, but prospective new buyers will find them increasingly expensive. The US needs foreign buyers of its assets, especially Treasury securities, to finance our current account. Their enthusiasm will be diminished if the dollar continues to rise.
For the average Joe the strength of the US$ against other currencies is irrelevant. Inflation and income security are the main worries.
Even if one is a world traveler carrying US$, the price of goods and services at the local country is what matters.
Yes, the value of the dollar keeps going up, sort of! Against the Euro or Yen, yes. But I need more of them to buy almost anything physical I can think of. So, is the dollar really " going up". ? A question of perspective, I guess.
The strong dollar puts more of the inflationary pain on our allies. Another +25% or so might let us avoid a recession. Sometimes the free market is cruel to your best friends, other times there's some left over.
jlmanfred profile picture
Is the US dollar getting stronger due to other currencies weakening at a faster rate?
OverTheHorizon profile picture
@jlmanfred higher interest rates
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