Tumbled...

 

The US dollar plays an outsized role in the global economy and international finance. And right now, it is stronger than it's been in two decades.

The simplest explanation comes back to the Fed.

The value of the UK pound, the euro, China's yuan and Japan's yen, among many others, has tumbled. That makes it more expensive for those nations to import essential items like food and fuel.

In response, central banks that are already fighting pandemic-induced inflation wind up raising rates higher and faster to shore up the value of their own currencies.

The dollar's strength also creates destabilizing effects for Wall Street, as many of the S&P 500 companies do business around the world. By one estimate from Morgan Stanley, each 1% rise in the dollar index has a negative 0.5% impact on S&P 500 earnings.