AFMC - Dollar Dominance And The Ghosts Of 1997

2024-04-20 05:30:00 ET

Summary

• For investors whose portfolios are calculated in US dollars, the Japanese yen is down around 10% versus the greenback.
• The strong dollar is a direct outcome of the market’s long-overdue realization that US interest rates are likely to stay higher for longer, with doubts now growing that the Fed will cut rates at all.
• Higher interest rates attract more foreign money into dollar-denominated securities.

One of the big stories in markets this year has been the hale performance of Japanese equities, with the benchmark Nikkei 225 index finally clawing back to and surpassing the record high it had set 34 years earlier, at the end of calendar year 1989. Currently, the Nikkei is up 13.2 percent for the year – not bad! But that’s 13.2 percent in local currency terms. Unfortunately for investors whose portfolios are calculated in US dollars, the Japanese yen is down around ten percent versus the greenback. So that nice gain on Japanese stocks winds up as a fairly anemic low single digits return when it shows up on your dollar-denominated quarterly statement....

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