On Tuesday, The United States dollar index increased in value to 99.37, reaching a two year high. The dollar’s bump in monetary value has been an adverse effect of a slowing global economy. The United States and China’s trade war has drastically impacted the world’s ability to garner investment, produce goods efficiently and cheaply, culminating in global economic damage. Despite the United States being a primary perpetrator and direct recipient of casualties caused by this trade war, the United States economy remains strong in growth in comparison to the rest of the world. In tandem with the Euro reaching a three year low, and heightened interest rates, the dollar has raised in value. Normally, a stronger dollar equivalates to a stronger economy, however, is a stronger dollar beneficial for the United States?
President Trump recently tweeted, “As your President, one would think that I would be thrilled with our very strong dollar. I am not!” Trumps concern resides within higher interest rates, despite holding the dollar at a high value, high interest rates degrade manufacturers ability to provide services at an affordable rate. Trump specifically mentions in his tweet both Caterpillar and Boeing, who have both struggled immensely from the trade wars and higher interest rates. Both manufacturing giants have witnessed horrific stock drops after recent trade and rate policies, and if the trade war remains unresolved and interest rates continue to maintain a high level, more manufacturers will follow suit and continue down a harmful road for a major backbone of American society.
Keith Knutsson of Integrale Advisors commented that, “Although the United States dollar index raised in value, it isn’t an appropriate measure for economic strength and could even be harmful to our economy providing interest rates hold.”