In this piece, CIO Jonathan Lewis and Senior Vice President of Quantitative Strategies, Iraj Kani discuss the impact of FX volatility and the US dollar rally.
Currency markets have recently been a major source of market instability globally, as evidenced by the ripple effects of China’s surprise devaluation of its currency. As a result, we believe FX volatility has important asset allocation consequences.
Dollar strength has slowed down exports and made imports cheaper – both of which would contribute to lower inflation in the US. Additionally, the rally has destabilized global markets and strained their growth. These factors will likely influence the Fed’s tightening cycle.
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