The US dollar is at war with the Fed

As global currents lift the US dollar, Federal Reserve speakers are fuelling -- rather than fighting -- the unit’s strength.

The strength of the US dollar is making it harder for the economic recovery in the US to gather more momentum, but rather than engage in a currency war with other central banks it seems the Federal Reserve Bank is at ease with the situation. I would find it hard to believe the Fed doesn’t know there is a war on at the moment when over the past two years the greenback has gained almost 40 per cent against the yen -- 4 per cent in the last month alone, while in trade with the euro it is up some 9 per cent since May.

While the main causes for these moves are due to the actions of the Bank of Japan and the European Central Bank, the market's anticipation of tightening monetary policy from the US Fed has exacerbated the strength of the US dollar.



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