Over the past few months we have been witnessing relative USD strength. A good portion of the world's debts is denominated in USD and in order to repay those debts more debt needs to be issued, or existing debts need to be refinanced and rolled over.
The problem is that there is not enough collateral that can be used to issue more debts. The balance sheet value of the existing collateral has been blown out of proportions after years of quantitative easing and with the central banks raising interest rates the present future discounted value of an asset's cashflow is lower.
Relative to the other components of the DXY the USA is in a position of strength and the USD is likely to keep increasing in value.
The problem is that there is not enough collateral that can be used to issue more debts. The balance sheet value of the existing collateral has been blown out of proportions after years of quantitative easing and with the central banks raising interest rates the present future discounted value of an asset's cashflow is lower.
Relative to the other components of the DXY the USA is in a position of strength and the USD is likely to keep increasing in value.
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