A Surging or Slumping US Dollar?

Could China Dump Its Dollars In Some ‘Trade’ Retaliation? Or Will US Dollar Strength Continue?

 

There are growing concerns that an escalation in the US-China tariff spat will trigger retaliation from China in the form of forced sales of US Treasury debt, thereby triggering a lower US dollar. This not only seems impractical and so unlikely, but fundamentals, namely a global shortage of ‘safe assets’, the tight US Fed and rebounding US private sector cash generation, all should underpin a moderately strongly US unit. EM currencies are exposed to this threat, but a significant improvement in EM currency risk since mid-2018 suggests that any sell-off will be limited.