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