U.S. dollar hit 20-year high: How could you benefit from it?
The U.S. dollar is on track to rise for its four consecutive month after hitting a 20-year high on Monday as investors braced for the aggressive rate hikes from the Federal Reserve in a bid to tamp down the soaring inflation. ![]()
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The $USD(USDindex.FX$ is expected to edge close to 110 points.
[What is the USD Index?]
The U.S. Dollar Index is used to measure the value of the dollar against a basket of six foreign currencies, including the Euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona.
[Why is the U.S. dollar smiling?]
For the time being, the dollar will keep “smiling”, as indicated by the “dollar smile theory” that no matter whether the US economy outperforms or underperforms its peers, the USD tends to strengthen.![]()
Meanwhile, geopolitical conflicts like the Russia-Ukraine war have inflicted rising volatility in global capital markets as well as strong demand for haven assets.
Stephen Jen, a former economist at Morgan Stanley, came up with The Dollar Smile Theory![]()
[How does it affect your investment?]
It should be worth noting, however, the U.S. dollar has both boons and banes.
An obvious case is that a strong dollar saves the cost of Americans traveling overseas but puts foreign tourists visiting the U.S. at a disadvantage. A Singapore resident who intends to exchange $10,000 at the beginning of the year, for example, would have paid about S$13,500, but now it would cost about S$13,900.![]()
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Moreover, as the dollar continues to rise, some dollar-denominated cash management funds may increase potential gains.
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be wealthy : The Dollar Smile Theory is interesting
$USD/SGD (USDSGD.FX)$$FTSE Singapore Straits Time Index (.STI.SG)$$Fullerton SGD Cash Fund (SG9999005961.MF)$
High Profit Low Loss : Unable to take exam, tanked on question 3.
passionate Auroch_84 : that's awesome