As any old-school currencies trader will tell you: buy dollars, wear diamonds. It is certainly shaping up to be a decent bet this year, in a manner that is throwing up pockets of stress around the world. But if you are waiting for a shock-and-awe exercise to turn this around, you are likely to be waiting a long time.
At a glance, the world’s dominant reserve currency is pretty dull at the moment. The DXY dollar index, which tracks it against a clutch of other major currencies, is up 4 per cent or so in 2024 — a decent ascent but nothing spectacular. The index still sits about 7 per cent below the record high it struck in September 2022.
But to many analysts and investors, that just gives the buck space to keep stretching higher as markets recalibrate their US interest rate expectations. “The dollar still has more to give,” wrote Shahab Jalinoos and Vassili Serebriakov, currency analysts at UBS. Some strain is already spilling over in Asia and emerging markets, and it is not too hard to imagine it becoming a source of broader market volatility later this year.