BIS paper on dollar milkshake/wrecking ball
A lot we have talked about here, but a couple interesting things.
Strong dollar hurts global trade generally.
”Second, an appreciation of the dollar tends to go hand in hand with weaker global trade (Graph 3, right-hand panel). This is linked to the widespread use of the dollar for trade invoicing and financing. When the dollar appreciates, export prices, which are sticky in the short term, do not change much, while import prices in local currency increase, depressing import demand.4 In addition, a stronger dollar tightens trade credit conditions as trade credit is denominated mainly in US dollars. This hinders both imports and exports and puts pressure on global value chains.5 Consistent with such outcomes, the World Trade Organization forecasts a significant slowdown in world trade growth in 2023.“
Also another call from a foreign entity for the Fed to chill.
“Finally, there is the question of whether the sharp appreciation of the dollar makes the case for greater global coordination of monetary policy. The concern could be that central banks may otherwise overtighten monetary policy from a global standpoint as they try to limit exchange rate depreciations.12 While most central banks have increased policy rates rapidly in recent months and have communicated their intention to hike rates further, real interest rates have declined over the past year or so and remain negative in most regions (Graph 5, right-hand panel). Furthermore, inflation remains stubbornly elevated. These observations caution against the notion that monetary policy is overreacting to the global surge in inflation.”
Good luck with that.