Opinion: Strong Dollar Could Spell Problems for Other Currencies
The election of Donald Trump has made the dollar stronger than ever, as the euro has moved toward parity with the dollar, and the yen and sterling have also weakened. The problem right now is not that the yuan is weak, but that the U.S. dollar is strong.
Why is the dollar strengthening so much, and what does this mean for RMB internationalization?
The dollar is strengthening not just because the Fed is raising interest rates. The rise in interest rates is a catch-up process because there are more than enough signs that the U.S. economy is beginning to take off, and employment numbers are already reaching full employment status. Hence, if Trump carries out tight immigration policy and crack down on illegal workers, wage inflation is more or less inevitable.
Andrew Sheng is a distinguished fellow at the Asia Global Institute, University of Hong Kong.
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