Breaking Down the US Dollar’s Recent Bull Run

Posted by Visual Capitalist

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Over the last year, the US Dollar has had an incredible surge in value of 11%. It appreciated against all main currencies in the world in 2014. 

Meanwhile, gold also actually increased in value when valued against the vast majority of world currencies but the dollar was the only currency that it could not conquer.

What is behind this surge in value for the dollar? 

In our opinion, it is a very easy explanation: as investors abandon all other options, they continue to look for safe havens. With central banks such as the Swiss National Bank and the Bank of Canada making surprising interest rate or pegging decisions, everyone is looking for safety and predictability. The ECB and Bank of Japan are piling onto the problem by fighting deflation with massive quantitative easing programs. 

These are also the reasons why gold has also seen a recent bounce back as well.

The question is: how long can the USD remain the safe haven of choice? With moderate economic growth still happening, investors still seem to have confidence in the United States. However, if that at all falters and economic growth slows, there will be nowhere to hide. Remember that it only takes one event to cause a ripple effect and the US Dollar bull run could be over.

To quote Mr. Warren Buffett: “Only when the tide goes out do you discover who’s been swimming naked.”