STORY: Will the U.S. dollar remain as strong in 2023?
The greenback has seen a breathtaking surge in 2022 - trampling foreign currencies, gouging corporate profits and giving investors one of the year’s few winning trades.
For a time in September the dollar stood at its highest level in nearly two decades.
Rising U.S. yields, the relative strength of the economy, market volatility, surging global inflation, energy price spikes and the war in Ukraine all contributed to the gains.
Getting the dollar right is key for investors, as its trajectory sways everything from corporate earnings to the price of raw materials such as oil and gold.
A strong dollar makes U.S. exporters' products less competitive abroad, while hurting American multinationals looking to bank their foreign earnings.
Commodities become more expensive for foreign companies and governments who borrow in dollars to service their debt.
While a strong greenback can tamp down U.S. consumer prices, it can then exacerbate global inflation.
There are signs that Wall Street’s sentiment on the dollar may be shifting.
Its year-to-date gains have been roughly cut in half, with investors betting the Fed will slow the pace of the rate hikes that initially boosted the dollar.
Longer term, recession worries may take over as a key driver.
Nearly 80% of strategists polled by Reuters now see little scope for dollar upside based on future monetary policy.