Why We’re Still Bullish on US Dollar, Bearish On Commodities as Fed Cuts Back Rate Hikes

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Last week, the Federal Reserve scaled back on its plans to hike interest rates this year. The potential for a delay has taken steam out of the dollar’s rally and contributed to a bounce in commodity markets.

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Higher US interest rates usually help boost demand for the dollar, which helps the dollar to appreciate against other currencies. The dollar gained significantly last Summer. This dollar’s strength makes it harder for US companies to sell goods overseas and to compete against imports, as Fed Chairwoman Janet Yellen pointed out in the last meeting. For this reason, the Fed might not want to raise rates until the dollar cools down.

 

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