Global: The US dollar smile and its future

In this esoteric piece, we take a look at the potential very long-term drivers of the USD and conclude that the Biden administration may “bananafy” both the Fed and the USD over the coming years, and China may be well-equipped to take advantage of it The dollar smile is a theory saying that the USD tends to strengthen both when the US economy is very strong but also, counter-intuitively, when the economy is extremely weak (during recessions or during intense risk aversion) in sharp contrast to other currencies. In our February dollar-o-meter we outlined cyclical drivers that actually look fairly benign for the … (full story)

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