Time for Americans to go on holiday…

The US Dollar index is off to a flying start, after finishing strong in 2014:

Up and away... USD index.  Source: thinkorswim by TDAmeritrade

Up and away… USD index. Source: thinkorswim by TDAmeritrade

What’s going on?

  • Eurozone worries: no secret that economic growth in the Eurozone is basically zero to negative.  Greek exit (‘Grexit’) is another real possibility, as their protest party is favoured to win a late-Jan election.  The world looks to ‘Super’ Mario Draghi of the ECB to instigate proper quantitative easing to help salvage the system.
  • Japan worries: despite early success of Abenomics, Japan remains with very little growth.  The BOJ helped before with QE…maybe it’s time for another round.
  • EM worries: China is slowing down.  Russia is a well-known loser due to oil prices.  Brazil has zero growth.  India is hanging in there, but for the most part folks are less willing to take the risk.
  • What’s left? End of QE/higher rates in the US.  The problem with being the best of a bad lot is currency appreciation.  Portfolio effects (e.g. foreigners buying US assets for relative safety) means a solid bid for the USD.

In sum: the USD is at multi-year highs versus other currencies.  If you’re an American, considering a holiday, might I suggest the time for seeing the rest of the world is nigh.

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3 thoughts on “Time for Americans to go on holiday…

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