The following is a quote from The Economist (Dec. 3, 2016):
“The dollar has been gradually gaining strength for years. Butthe prompt for this latest surge is the prospect of a shift in theeconomic-policy mix in America. The weight of investors’ money hasbet that Mr. Trump will cut taxes and spend more public funds onfixing America’s crumbling infrastructure. A big fiscal boost wouldlead the Federal Reserve to raise interest rates at a faster rateto check inflation. America’s ten-year bond yield has risen to2.3%, from almost 1.7% on election night. Higher yields are amagnet for capital flows.â€
There has also been Fed attempts to raise interest ratesrecently.
EXPLAIN IN A PARAGRAPH: Will higher US interest rates strengthenthe USD? Agree or disagree. Explain fully. Also, will the resultingchange in the USD (from your analysis) be consistent with PresidentTrump’s overall economic perspective on trade and USmanufacturing.
Please address these questions from a Jan. 1, 2017 perspectivefor that time period.
