Discussion in 'Forex' started by nooty, Aug 17, 2009.
Why does this happen?
The current growth policy of the US government is built on increasing debt, and a slow, steady currency devaluation. If the value of the currency appreciates, that debt gets more expensive relative to other currencies and assets. So, a strong dollar creates problems for debt servicing.
Secondly, as the dollar is still the reserve currency for commodity assets, when the dollar strengthens, commodities fall in nominal terms.
With a globalized economy, most american multinational corporations have their revenue base in other currencies, in which they use to repay their borrowed dollars.
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