The big question is whether this dollar surge is in fact a ‘short run’ aberration or whether it is a more permanent feature of the global landscape
A sign is pictured during the G7 leaders summit at the Bavarian resort of Schloss Elmau castle, near Garmisch-Partenkirchen, Germany, June 27 2022. Picture: REUTERS/LUKAS BARTH
With geopolitical tensions rendering the wider G20 finance grouping barely functional, finance ministers and central bank chiefs from G7 allies met separately — and with myriad pressing issues from the energy crunch, war in Europe and climate change. Maybe that is all they wanted or needed to say, short of action. But the choreography lacked punch, to say the least — the slightly jaded reference back to a five-year old formulation giving the impression of afterthought, or an issue most did not want to take head on right now.
But the final G7 statement seemed to accept it as a fact of life, reflecting the more aloof take on events from IMF chief economist Pierre-Olivier Gourinchas earlier in the week. Raw interest rate gaps have been the big driver. But as Fed rates climb and global stock and bond prices plummet the attraction of dollar cash as a haven is enhanced even though resulting dollar currency strength often exaggerates that stress in a vicious cycle.
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