The power of the US dollar explained

The US dollar affects nearly everyone. The US dollar plays a central role in the international financial system, and US monetary policy has an outsized role in macroeconomic outcomes for countries around the world.

This is one of the best understood facts in international economics. Critical to trade and finance, the US currency affects every other economy and the Federal Reserve’s policy is transmitted worldwide via exchange rates.

In an article which has appeared in Frankfurter Allgemeine Zeitung London Business School's Professor Hélène Rey explains the link between the strength of the dollar and financial conditions worldwide. Drawing on her research in the field, Rey explains how US macroeconomic news and the vast financial firepower of US investors drives the global financial cycle.