The year of dollar danger for the world


L'année de tous les dangers pour le dollar US

America’s closed economy can handle a surging dollar and a fresh cycle of
rising interest rates. Large parts of the world cannot. That in a nutshell
is the story of 2015.

Tightening by the US Federal Reserve will have turbo-charged effects on a
global financial system addicted to zero rates and dollar liquidity.

Yields on 2-year US Treasuries have surged from 0.31pc to 0.74pc since
October, and this is the driver of currency markets.

Since the New Year ritual of predictions is a time to throw darts, here we go:
the dollar will hit $1.08 against the euro before 2015 is out, and 100 on
the dollar index (DXY).

Sterling will buckle to $1.30 as a hung Parliament prompts global funds to ask
why they are lending so freely to a country with a current account deficit
reaching 6pc of GDP.

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