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The Federal Reserve’s actions, particularly changes in interest rates, directly influence the US dollar’s strength. When the Fed raises interest rates to combat rising inflation
Investors seek higher returns from US assets, leading to a surge in demand for the dollar, which drives up its value relative to other currencies.
While the US dollar has shown resilience, its continued strength depends on various factors such as the trajectory of US inflation, the Fed’s interest rate policies, and global economic conditions.
If inflation remains elevated, and the Fed continues to raise interest rates, the dollar could maintain its strength.
However, if inflation is brought under control or if other economies outpace the US in tightening policies, the dollar's strength may stabilize or weaken.
A strong US dollar can create economic challenges for countries with weaker currencies. As the dollar appreciates
Developing countries, in particular, may struggle with higher debt payments if they hold US-denominated debt.