The strong US dollar gets stronger

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Ethan Wu (0:36)

Thank Pushkin, the dollar is motoring higher. It is up something like 6% in the past 50 days, dragging down all kinds of currencies from the sterling to the euro to the yen. Today on the show, we discuss why the dollar is so strong right now, and why it matters for anyone who uses currency to pay for things.

This is Unhedged, the markets and finance show for the Financial Times in Pushkin. I'm reporter Ethan Wu, coming to you live from the London studio for once, joined in The Flesh by FT Markets editor Katie Martin.

Katie Martin (1:09)

You exist in real life, in human form.

Ethan Wu (1:11)

I wasn't sure that you did exist, but now I've confirmed for myself. I trust Verify is kind of my philosophy when it comes to that.

Katie Martin (1:17)

He thought I was like an AI Katie Martin, like.

Ethan Wu (1:22)

You died 10 years ago, and they trained you on all the columns you've ever written.

Katie Martin (1:26)

I feel like this is a segue. Welcome to London, Ethan Wu.

Ethan Wu (1:31)

And the connection between me being in London and this currency show that we are doing right now. So Katie, I got off the plane at Heathrow, and the first thing I did at the airport is I went to that horrible little currency ATM that charges you ridiculous markup and a service fee.

Katie Martin (1:46)

Why though? Why though?

Ethan Wu (1:47)

Because I'm stupid.

And I paid $1.30 per pound. And I got like 140 pounds.

Katie Martin (1:57)

The exchange rate is 120 One pound will buy you $1.22.

Ethan Wu (2:03)

Oh, God.

And not only did I pay this exorbitant exchange rate, I also found out when I got here that you guys all use cards now, like an actual civilized country. I thought it was going to be the type of thing where I'm paying in cash everywhere.

Katie Martin (2:15)

Yeah, we don't pay in like bits of stone.

Ethan Wu (2:19)

Well, I just, I finished this George Orwell book earlier this year, and there's a bunch of like currency gibberish in there I did not understand. What is a two-bob bit? What is a bob note? What is a half-crown? I don't know what any of this stuff is.

Katie Martin (2:30)

Okay, so some of this is the old money. Old money, so it's a bit silly. But like, yeah, like a quid is a pound is the main thing that you need to know while you're here. So if someone says to you, right, that's five quid or that's a fiver, that's five pounds.

Ethan Wu (2:42)

Fiver.

Americans, you hear that? A quid is one pound, and don't do your FX trading at the airport. Anyway, we need to talk about why it matters, right? That the dollar is so strong.

One way to understand it is from the perspective of a tourist, right? If you are coming into a country with a strong currency from the country you came from, you just buy more stuff. Yeah. That's I think pretty intuitive. Most people get that.

Katie Martin (3:04)

Presumably you've been like trawling around Harrods while you've been here, like spending money like it's going out of fashion.

Ethan Wu (3:10)

Yeah, my purchasing power is way up, which I appreciate.

The things are expensive in London, I will say, even compared to New York. But that's not the only way that a strong currency matters. I mean, one thing that matters a lot for Europe, right? Is that Europe imports a lot of energy, especially from the US, Middle East, parts of Asia. And oil primarily is priced in dollars. So it has a big impact.

Katie Martin (3:33)

Yeah. So you know what they say about the dollar, right? It's our currency, your problem.

Ethan Wu (3:38)

Specifically, my currency, your problem.

Katie Martin (3:40)

Correct.

And so all major economies, apart from kind of Japan and China, that's a slightly different issue. But most major economies are really struggling with high inflation at the moment. And the last thing they need is for all of the oil and other commodities that they import that are denominated in dollars to be getting more expensive.