Will the strong dollar continue to spook markets?

May run out of steam

We are living in a dollar-dominated world, a fact most famously captured by John Connally, President Nixon's Treasury Secretary, who once told a group of global finance ministers “the dollar is our currency, but it's your problem”.

Students of economic history will be aware of the disruption that a strong US dollar can cause, however, at times such as this it is important to remember that the global economy is cyclical, and such periods eventually do pass. To appreciate this fact, cast your mind back to the early 1980s. The Federal Reserve was sharply increasing interest rates to combat high inflation,  which triggered a prolonged dollar rally. The dollar's rise came despite the US government running a large deficit, and the strength relative to its major trading partners caused prolonged pain for exporters. ...