Just How Strong Is the U.S. Dollar?
The story of the U.S. dollar for some time, since July 2014 at least, has been that it is seeing an unusually rapid rise against all other world currencies. The dollar gained strength due in large part to the U.S. having an especially strong economy while the rest of the world struggled. During the second half of 2014, the U.S. dollar increased in strength against all other major global currencies, including the Swiss franc, Japanese yen, and British pound. And in early 2015, CNN reported that the U.S. dollar was seeing its fastest rise in 40 years, asserting that the unexpected rise of the dollar wouldn’t be changing anytime soon.
2016, however, has seen mixed outlooks concerning the U.S. dollar. Pound Sterling Live, a British news outlet, reported back in February, for example, that Standard Chartered was forecasting fading strength for the U.S. dollar in 2016. The article then continued by reiterating that a case could still be made for selective USD outperformance, with the dollar still growing stronger against some international currencies, including the euro.
Meanwhile, many new outlets during the first quarter of 2016 underlined the strength of the U.S. dollar while cautioning against having an all-positive view of a strong dollar. In a January article titled “Dollar strength posing a threat to company profits,” CNBC confirmed that the U.S. dollar was continuing to gain steam against the major international currencies, nearing parity with the Euro. The article then cautioned, “Dollar strength might seem like a reflection of U.S. economic power, and it may even be good news for the pockets of American consumers. But its impact on corporate earnings and the market isn’t all that great.” The article reiterated that a strong U.S. dollar could hurt corporations by making U.S. exports and products more expensive for other countries. Moreover, the value of overseas sales would be reduced when converted back into U.S. dollars. So for companies that have a large international presence, a strong dollar isn’t exactly something to be excited about.
Market Watch reported in late May that the U.S. dollar had just advanced past its major rivals, after new data showed that the U.S. economy had grown at a faster-than-expected pace during the first quarter of 2016. So while the U.S. dollar may have seen a dip at the beginning of 2016, things could be looking strong for the U.S. dollar once again.