A Strong U.S. Dollar Weighs on the World

<i>&gt; The yen is at a 34-year low against the U.S. dollar</i><p>I live in Japan and this has happened so quickly it&#x27;s been stunning. While not much has changed domestically so far, I am hearing and starting to see foreign people question whether they could work and live here long term if it stays like this. It&#x27;s fine if you are earning USD and visiting Japan (wow there are so many tourists this year) but if your salary is priced in JPY and you plan to retire in the US, it&#x27;s basically impossible right now.<p>My understanding is that most of the pain in JPY is being caused by carry trades by the financial sector. Because they are very common currencies and most traders right now believe that both the US and JP are stuck with a wide spread in interest rates... you can borrow JPY and invest in USD and make 4-5% on it.<p>As an aside, I also wish we didn&#x27;t use the terms strong&#x2F;weak for currencies because it carries a good&#x2F;bad connotation. It&#x27;s just high&#x2F;low and there are pros&#x2F;cons to each.

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Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar.<p>You wouldn&#x27;t think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

For all the drama in US Politics, you have to admit they run extremely well economically. Quick to keep rates high, good forecasting, good trade policies, good energy policies.<p>Europe is like a kid copying the US homework, trying to make the equations work.

I think the main reasons of the strong USD are: - it&#x27;s status as world reserve currency - it&#x27;s seen as a safe heaven - The US is still the most profitable market to launch new product - the US job market is still performing well compared to the battered economies of Europe where unemployment is starting to go back up<p>If the ECB decides to lower interest rates before the US Fed does, then even more capital will flow in the US because why would you accept a lower interest rate when you can get a better one in the US in the same asset class.<p>That in turn will keep making the USD stronger than the euro.

This is one of those instances where technical language is misleading. The US dollar is indeed &quot;strong&quot;, but it still buys less stuff than it did last year. The gold price is not impressed by this sort of strength. The news is interesting more as commentary on relative policy positions of central banks around monetary supply and how much of that is leaking into international trade.<p>On that topic; I&#x27;ve been watching the US Treasury&#x27;s &quot;Major Foreign Holders of Treasury Securities&quot; [0] with some interest. There are some very big strategic changes afoot; China doesn&#x27;t seem particularly willing to take US debt any more. They&#x27;d going to be 3rd largest holder soon and now hold less than 10% of the outstanding US treasury debt.<p>[0] <a href="https:&#x2F;&#x2F;ticdata.treasury.gov&#x2F;resource-center&#x2F;data-chart-center&#x2F;tic&#x2F;Documents&#x2F;slt_table5.html" rel="nofollow">https:&#x2F;&#x2F;ticdata.treasury.gov&#x2F;resource-center&#x2F;data-chart-cent...</a>

There&#x27;s a rumor that Chinese government is going to significantly devalue the yuan <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2024-04-29&#x2F;yuan-devaluation-debate-surfaces-as-traders-mull-next-fx-shock" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2024-04-29&#x2F;yuan-deva...</a>, to try to boost export decline from March. <a href="https:&#x2F;&#x2F;apnews.com&#x2F;article&#x2F;china-trade-exports-imports-b25c21299101d2483f946a0ce264662f" rel="nofollow">https:&#x2F;&#x2F;apnews.com&#x2F;article&#x2F;china-trade-exports-imports-b25c2...</a>.<p>When that happens, oh boy, that&#x27;s going to be so much money flowing from China to US that it&#x27;s going to make the dollar even stronger

The rest of the world also printed a lot of money. In a globalized economy inflation does remain isolated in the country that it originates in. Especially when the country has a lot of exports.<p>Normally the exchange rate divergence could be countered by increasing interest rates in the country with the weakening currency. But today it appears most countries are not willing to do this to the extent necessary.

Japan monetary policy is a ponzi scheme waiting to crash<p>been that way for decades

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