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The US dollar’s climb last week to its highest value in a year, partially in anticipation of the incoming Trump administration, could cause headaches for CFOs of American companies.
For example, a surging dollar will make US exports pricier and could weaken global demand for American products. A bullish dollar could also make it harder for companies in emerging markets to finance trade, risking the supply—and price—of imports into the US, even without the tariffs promised by the returning president. CFOs are following closely as they plan for 2025.
“When the dollar is strong, financial conditions tighten,” American University finance professor Valentina Bruno recently told the Wall Street Journal. “Financing trade and exports become more complicated and more expensive.”
Fed up. Analysts also expect the dollar to shape monetary policy in the US and abroad for at least the next two years. The dollar’s strength has a knock-on effect on federal monetary policy and may slow down interest rate cuts, raising the cost of debt for companies.
Thierry Wizman, a strategist at Macquarie, told MarketWatch in mid-October he believed that if Trump won, the Fed would keep interest rates higher than it otherwise would have through 2025 and 2026 to offset the inflation he expected to come from Trump’s plans for tariffs, tax cuts, and reducing immigration.
There’s also a ripple effect in global monetary policy and foreign exchange imbalances that will have an impact on the bottom line. The Fed’s counterparts in Asia “are already moving to guard their currencies while others are on standby,” Bloomberg reported on Election Day, from “a surge in the dollar that has put currencies across the region under pressure.”