It seems that the dominance of the American dollar continues. US employment growth in November at 314,000, along with some statements of representatives of the ECB, contributed to the fact that the US dollar index rose to the heights of 2006.
A move above 90 is very possible and if the rate of strengthening of the dollar continues, Forex market will need a miracle to slow the inexorable rise of the U.S. currency.
But a strong dollar is not such a no problem thing, as noted in its quarterly review of the Bank for International Settlements (BIS), which was published at the last weekend. It pointed out some interesting thoughts.
The opposite movement of the main central banks in the world stokes volatility. If that continues, 2015 will be the year for the Forex market volatility.
A stronger dollar can make emerging markets vulnerable financially, so 2015 is likely to be difficult for emerging markets.
Countries with high debt in US dollars are most at risk and further growth of the currency may reduce the creditworthiness of many companies and potentially involves tightening of financial conditions.
BIS observed that countries whose currencies are moving according to the dollar, as a rule, have a significant USD reserves as the dollar is considered as less risky currency for investments or loans. This can ensure the dominance of the dollar and probably will not let the euro or Chinese yuan overtake the USD in the near future.
Thus, if the upward trend of the dollar continues, it may be a problem in a large group of the world economy, which is borrowed or invested assets on the basis of a dollar.
BIS report also brings two conclusions. The first is that emerging markets are at risk due to the growth of the USD, and the second: the dominance of the dollar as the world's reserve currency is unlikely to end soon.