The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Against the tide: Will the dollar rally persist?

The greenback revival, driven by ECB recognition that the eurozone is faltering, will be sustained by the narrowing of the US current account deficit, the fall in the oil price and the US pursuit of a soft monetary policy.

Last month I ended by saying that I expected the euro and the yen to continue to appreciate against the US dollar. Well, it was not long after that the greenback began a big rally against other major trading currencies. Rather than eat my words, I want to explain what this means and whether the dollar revival will last.

My key global investment theme has been that the credit crunch would cause credit to contract, causing global recession. But I recently added a coda that energy and other commodity prices (in which we were short) would collapse as a result, causing headline inflation to plummet towards the core rate in rich countries and restoring some modicum of purchasing power in the even harder-hit emerging markets.

This would restore some measure of freedom to central bankers. Markets would love that. Risk assets would have a big rally. And the dollar is also a risk asset.

The catalyst for the recent dollar rally was the European Central Bank’s shift in rhetoric at its last rate meeting to recognize that the eurozone economy is tanking.

G4 central bank real policy rates

From 1999 to 2008

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.

By continuing to use & browse the site you agree to our Privacy Policy.
I agree