Global Risk Assets Soar as US Dollar Plummets

The decline of the US dollar, accelerated by cooling US inflation, is benefiting risk assets worldwide. A weaker dollar makes exports more competitive for US companies, while also making it cheaper for multinationals to convert foreign profits back into dollars. Raw materials become more affordable to foreign buyers, boosting the S&P/Goldman Sachs Commodity Index. Emerging markets benefit as well, as a falling US currency makes it easier to service debt denominated in dollars. The decline in the dollar could also boost profits for foreign exchange strategies like the dollar-funded carry trade. However, a potential rebound in US inflation could unwind anti-dollar trades.