US Dollar Jumps Another Leg Higher as US Government Shutdown Nears

September 29, 2023: The US dollar jumped to a new 20-year high on Thursday as the US government shutdown looms. The dollar index, which measures the dollar’s value against a basket of other currencies, rose above 110 for the first time since 2002.

The dollar’s strength is being driven by several factors, including:

The US government shutdown: The US government is on track to shut down on October 1, 2023, if Congress and the President cannot agree on a budget. A government shutdown would create uncertainty in the US economy and could lead to a recession.

The war in Ukraine: The war in Ukraine is causing economic uncertainty and disruption worldwide. Investors are flocking to the US dollar as a haven asset.

Rising interest rates: The US Federal Reserve is raising interest rates to combat inflation. Higher interest rates make the US dollar more attractive to investors.

The dollar’s strength has several implications for businesses, consumers, and investors.

Businesses that import goods and services overseas will face higher costs due to the dollar’s strength. Businesses that export goods and services from the US will increase their profits.

Consumers who travel overseas will see their money go less far due to the dollar’s strength. Consumers who purchase imported goods and services can expect to pay higher prices.

Investors who own assets denominated in foreign currencies, such as stocks and bonds, can expect to see the value of those assets decline due to the dollar’s strength. Investors who own assets denominated in US dollars, such as US stocks and bonds, can expect to see the value of those assets increase.

Conclusion

The US dollar’s strength shows the uncertainty and disruption currently gripping the global economy. Businesses, consumers, and investors need to be prepared for the implications of a stronger dollar.

Businesses can mitigate the risks associated with a strong dollar by:

• Hedging their currency exposure
• Diversifying their supply chains
• Raising prices to offset the impact of higher costs
• What Consumers Can Do

Consumers can mitigate the risks associated with a strong dollar by:

• Reducing their spending on imported goods and services
• Traveling overseas less frequently
• Investing in assets denominated in US dollars
• What Investors Can Do

Investors can mitigate the risks associated with a strong dollar by:

• Diversifying their portfolios across different asset classes and currencies
• Investing in assets denominated in US dollars
• Hedging their currency exposure
• Additional Tips

It is important to note that the US dollar is a cyclical asset, meaning its value goes up and down over time. Businesses, consumers, and investors should monitor the dollar’s strength and adjust their plans accordingly.

It is also essential to consult with a financial advisor to develop a plan that is tailored to your individual needs.