In recent weeks, the dramatic appreciation of the dollar in tandem with a surge in major U.S. indexes has delivered a shocking surprise to all those who expected a broad-based selloff in the event of an unanticipated outcome in the U.S. presidential election. Market participants appear to have confidently embraced the view that Donald Trump will be successful in implementing his pro-growth reforms, strengthening and stimulating the U.S. economy. This has been the main narrative of how the dollar has managed to appreciate so rapidly. It is currently at its highest level since 2003, and despite some modest profit taking on Monday its momentum remains intact.
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Undoubtedly, if this unusual strength in the dollar is sustained, the implications for the global economy will be significant. It is, therefore, warranted to examine the nature and the sustainability of the primary drivers behind the recent moves in currency markets.… Read More …