Strong dollar a threat to the US. Is a recession coming?

US President Donald Trump has been repeating all the time that the dollar is too strong and accusing everyone around that it is a result of speculation, not a real valuation of the currency. He is right? We probably will never know, but the fact is that the rising price of dollars can seriously threaten the US economy, and even the whole world.

The dollar has risen extremely well in recent 10 years. Of course, this is due to the low base, i.e. the period in which we begin to count growth. It falls at the end of the financial crisis, in which virtually all the world's economies have lost, as well as some currencies. For obvious reasons the most "Got hit" dollar, which then laboriously made up for losses. The effect is that value today USD is up to 25 percent. greater than in 2009. There has never been such a good decade in the history of the American currency.

However, the rise in the value of the world's most popular currency is not a cause for optimism in the United States of America. President Donald Trump himself knows this well, and he does not spare any words of criticism for those who - in his opinion - are responsible for the high price of dollars.

“Donald Trump is increasingly suggesting that the dollar is so expensive that even currency intervention may be necessary. If that happened, the long-term uptrend could be negated with a very strong signal, and the market would rather not fight against the most powerful economy in the world and we could see a pretty big sell-off " - writes the Bloomberg agency, citing sources in the White House.

Who loses on a strong dollar?

The high dollar price may be one of the reasons for the weakening US economy, which must stimulate interest rate cuts Federal Reserve. The more expensive the dollar, the smaller the profits of the largest corporations, and they drive both the US economy and the stock market. The higher dollar price also increases the cost of foreign companies in the US, as well as the cost of servicing loans for day-to-day operations that are denominated in dollars.

"The dollar may push the world economy into a more difficult situation and increase - already far too high - the risk of a recession" - emphasizes Hans Redeker, who is responsible for the global currency strategy at the Morgan Stanley bank in London.

The strong dollar also reduces the profits of many listed companies from the S & P500 index, which is reflected in the lower quotations of the American stock exchange. This, in turn, also leads to fewer orders and higher unemployment. And from here it is a really small step to an economy slowdown, or even a recession. And not only in the US, because a strong dollar is already causing a decline in capital expenditure around the world.

Who will earn from the dollar price drops?

Of course, there are also those who already air the interest in the current situation. However, while he says from the basic principles of investing, nothing that is already expensive can be even more expensive, but buying at the tops is not the most sensible long-term move - as long as the current values ​​are indeed the highs.

Many say yes. Even Jack McIntyre from Brandywine Global Investment Management, who assumes a discount by up to 25 percent. over the next five years and is preparing for short positions in pairs with USD.

"My company is already exchanging dollars into South Korean won (KRW), Czech crowns (CZK) and New Zealand dollars (NZD)" - does not hide Jack McIntyre, whose company manages capital reaching 75 billion. USD.

Other analysts recommend the Swiss franc and Japanese yen for a really long time.