The quiet currency war

THE dollar has now become so strong that the development has found its way to an increasing number of headlines. The trend has been going on for quite a while now but the growing attention does not make the theme less interesting to deal with. The dollar's strength will have a consequence for American companies as well as investors' returns, depending on whether the dollar risk has been hedged or not. Strong shifts in exchange rates also have an obvious impact on the currently high inflation.

The dollar may have skyrocketed when Covid-19 hit the world in the first quarter of 2020 but interest rates fell just as steeply. The US central bank brought the US money market rate down to almost zero and pumped huge amounts of liquidity into the economy and following that, the 10-year interest rate fell to approximately 0.50 percent. Now, the dollar is rising at the same time as the Fed (Federal Reserve) raises interest rates very sharply, and the 10-year interest rate is at its highest in years — is the US dollar always the winner regardless of what happens?