In part, the dollar’s gain reflects the U.S. economy’s strength and investor confidence that Trump will accelerate growth by slashing taxes and pumping money into roads, bridges and other infrastructure. The dollar could rise even more now that the Federal Reserve has raised interest rates and foresees three more hikes next year. With rates far lower elsewhere in the world, many investors will shift money to the United States to capitalize on higher yields – a shift that could send the dollar even higher.
Which creates a problem: An expensive dollar makes U.S. goods costlier overseas – and imports cheaper in the U.S. That’s a recipe for more pain for American manufacturers. A high dollar can also lead some U.S. multinational companies to move operations to countries where their dollars go further.
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