Q&A: Why Is The US Dollar Appreciating So Much When US Bonds Are Falling In Value?

Q&A: Why Is The US Dollar Appreciating So Much When US Bonds Are Falling In Value?

over 1 year ago1 min

Question: “Why Is The US Dollar Appreciating So Much When US Bonds Are Falling In Value?”

Answer: “Hey, Nicolas! So, the main reason the US dollar has been appreciating so much is that the Federal Reserve has increased interest rates more aggressively than other central banks. And since higher rates make a currency more attractive, international investors have piled into the dollar and sent it surging relative to other currencies. At the same time, those higher rates make existing bonds less attractive – prompting investors to sell them and causing their prices to fall. What’s more, the Federal Reserve has been reducing its holdings of the bonds it’s accumulated over the years, which pushes their prices down even more.”

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