US multinationals are an enormous force in global commerce and when they send profits home they have to be changed into US dollars. Ergo a strong US dollar is toxic for profits and lower profits are bad for stock prices.
With the US dollar now in its longest rally since records began in 1973 there is every reason to worry about the currency’s recent surge in value. Commodity producers from the Gulf of Arabia to iron ore exporters in Perth are also feeling its impact as a strong dollar lowers commodity prices from oil to iron and copper.
Rally too long?
The only relief in sight might be the length of the rally itself. At 10-weeks this is over long and due for a correction. Currency markets seldom go up in a straight line for anything like this length of time.
This post was published at Arabian Money on 21 September 2014.
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