Why is the US Dollar Index Rallying So Sharply?
A popular question I’ve been asked recently is “With the US Government ‘printing money’ and the Economy going into recession, why in the world is the US Dollar Index rising?!?” Let’s take a look at a possible prevailing reason. While clearly, there are dozens of fundamental and economic reasons as to the development, I wanted to focus on one of those major reasons: It’s because foreign currencies are falling faster/harder than the US Dollar due to fears their economies will suffer worse than the US Economy. Think in terms of relative strength. Currency indexes are baskets of currency crosses, or how a particular currency is performing relative to other currencies. It’s just like if you perform relative strength analysis on a stock to an index. For example, if you want to know if Microsoft is doing better or worse than the S&P 500 over time, you would divide MSFT by the S&P 500 (in StockCharts.com, this is done by typing MSFT:$SPX into a chart). You are then given a ratio which either r
