Bucking the Greenback
Dollar index's move above US$1.005 is an important breakout from 22 months of sideways trading.
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US PRESIDENT-elect Donald Trump paints himself as an independent rogue throwing out the established political order. His policies hark back to Theodore Roosevelts' New Deal which built what is the now crumbling Interstate Freeway infrastructure and to Ronald Reagan's years of tax cut-fuelled inflation. As much as Mr Trump would like to see himself as a new broom sweeping out an old order, there are economic relationships that are unchangeable.
It's too early to know if the Trump bump in US market indexes is a benign or malignant lump. Traders are following the equity index's momentum. Other traders and business observers are more concerned about the potential malignant impact on currencies, particularly in a world where trade protectionism is on the rise. Trade is increasingly about the flow of capital and not just the flow of goods through the port of Singapore.
US dollar strength or weakness is tracked through the dollar index. It's an outdated index that reflects the world reality in 1973 after the Bretton Woods agreement was abandoned.
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