U.S. dollar has become ‘bit of a wrecking ball’: Strategist

The strong dollar is wreaking havoc on other countries and U.S. multinationals operating abroad. Some strategists see no near-term stop to the rising greenback, even amid a recession.

“The dollar index can continue to rally here,” DailyFX.com senior strategist Christopher Vecchio told Yahoo Finance Live.

The US dollar (DX-Y.NYB) against a basket of currencies is up roughly 17% year-to-date. The greenback against the Japanese Yen (JPY=X) has gained about 30% during the same period.

“There is really no stopping the U.S. dollar versus a low yield in currencies like the Yen,” said the strategist.

“This key fact is that the Federal Reserve right now has such a significant yield advantage in nominal and real terms agains the other major central banks that the dollar has become a bit of a wrecking ball,” added Vecchio.

Even amid a recession in the United States, it’s unclear how much the dollar would come down.

“That’s the problem right now. I don’t think the dollar falls back that much,” said Vecchio.

“The dollar remains the nicest house in a bad neighborhood and as long as countries are dealing with recession and stagflation, they have the broken windows and the weed on their property. It is difficult to suggest that people aren’t going to flock to the greenback right now,” he added.

Ines is a markets reporter for Yahoo Finance. Follow her on Twitter @ines_ferre

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