The Strength of the Dollar

The dollar's strong demand is attributed to the resilience of the US economy and its well-established financial system compared to other economies worldwide. This strength is expected to continue, as low US interest rates typically support a robust dollar while making higher-yielding emerging market government bonds more attractive. Investors generally look for yields that outperform US rates, which means that when US rates fall, emerging markets become relatively appealing for investment. However, high US rates historically attract capital away from these emerging markets, complicating their financial outlook.