Condor Capital Management

Explore: The Competing Effects of a Strong Dollar

The Competing Effects of a Strong Dollar

Dollar

Recently, amid excitement over the possibility of the Dow Jones Industrial Average reaching 20,000, the U.S. dollar somewhat quietly hit a 14-year high. The greenback moved higher following December’s Fed meeting, in which the central bank raised rates and put out a hawkish statement on the possibility of more rate increases next year. In the following weeks, the dollar has continued to grind even higher. Beyond just the headlines, what does this actually mean for American consumers, businesses, and investors?

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What Has the Fed Been Doing in the Shadows?

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On the surface, many investors and market observers feel that the Fed just recently began to tighten monetary policy with a rate hike in December of last year. However, by looking at the Wu-Xia shadow fed funds rate1, the tightening cycle has been underway for quite a bit longer – since mid-2014, in fact.

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