Aug 24, 2022 - Economy
💵 Charted: King buck
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The dollar is the strongest it's been in 20 years.
Driving the news: The U.S. dollar index, which measures the greenback against a basket of currencies, hit its highest level in 20 years this week, as Europe's energy crisis battered the single currency.
- Much of this dollar strength is the flip side of weakness in the euro — which is heavily weighted in the index. Europe's energy crisis is creating deep uncertainty for the growth outlook, and stoking recession fears.
Why it matters: The the trajectory of the currency creates winners and losers in the U.S. and world economy.
- When the dollar is strong, it helps push down inflation by making imports cheaper for American buyers.
- But it will also make exports of American agricultural and manufactured goods more expensive to foreign buyers, potentially hurting factory towns and the farm belt.
- Traditionally, a strong dollar has also created havoc in emerging markets.
What we're watching: Global industrial conditions, which our colleagues over at Axios Macro recently pointed out, have been showing signs of strain under the mighty buck.
