USD: Odd recent trend - Natixis

Patrick Artus, Research Analyst at Natixis, notes that the US dollar has appreciated against all currencies since the start of 2018, but suggests that there are rising concerns against its accent.

Key Quotes

“There should now be concern about:

• The expansionary US fiscal policy, which will lead to an increase in the US external deficit;
• The effect of protectionism on the US economy (rise in the price of taxed imported products, leading to a loss of purchasing power);
• The real estate bubble in the United States.”

“Why is the dollar appreciating despite the threats overhanging the United States?

• Because of the rise in dollar interest rates relative to other currencies;
• Because rising risk aversion gives the dollar its role of safe haven currency, even when the rise in risk aversion is due to events in the United States.”