Currency Armageddon? A Word about the Hated Dollar
The “death of the dollar” will have to be rescheduled.
Sharply higher yields on Treasury securities and the prospect of more rate hikes by the Fed – in a world where other major central banks are still stewing innocent bystanders in the juices of NIRP, negative yields, and “punishment interest” – sent the hated dollar, whose death has been promised for a long time, soaring.
It soared against the euro. Or, seen from the other side, the euro plunged against the dollar, to $1.039, the lowest level since January 2003; down 35% from its peak of $1.60 during the Financial Crisis; down 10% from its 52-week high in March of $1.16; and down 2.7% from $1.068 yesterday before the Fed announcement.
Pundits are once again declaring that the euro will fall to “parity” with the dollar, as the ECB has been wishing for a long time, though it cannot admit officially that it is trying to crush the euro to give member states an export advantage. That would be “currency manipulation,” which is frowned upon in other countries. But a big wave of “money printing” and forcing yields below zero “to stimulate the economy,” whereby the currency gets crushed as a side effect, is OK.
Tourist destinations and flagship retailers in the US watch out: for your euro tourist customers, things are getting very expensive in the US, and some may choose to buy less or travel to cheaper countries.
The yen plunged 3% since the Fed announcement to ¥118.4 to the dollar. It’s down 15% since September. But it’s still higher than it had been in mid-2015, when it had sunk as low as ¥123 to the dollar.
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