Question 1
The US dollar remained strong in the past year even with a slowed economy that resulted from the Federal Reserve cutting interest rates thrice in 2019. The same year saw the pound struggle through the year but finished the year strong. The Canadian dollar held strong while the rupee weakened. When compared to the rest, the US dollar appreciated. It remained strong throughout the year due to its rate advantage ( Jones, 2020) . Political issues occurring in Europe especially the issue of brexit helped the currency maintain its edge over the euro. Even so, the current political activity in the US as it nears the presidential election is also helping keep the currency afloat while beating the rest. Further, factors like lackluster growth and import tariffs across the rest of the world are helping the dollar appreciate when compared to the rest ( Jones, 2020) . Other currencies like the Australian dollar and sterling pound may have appreciated but the US dollar remains the currency to beat across the globe.
Question 2
An appreciated dollar will have positive effects on the investment capacity of the US in foreign markets. An appreciated dollar makes it cheap for US companies to invest abroad through foreign entities or physical assets ( Picardo, 2019) . This then results in higher capital outflows.
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A rising dollar will result in low interest rates for the US economy in the long run and this keeps the economy stimulated. This further boosts US investment returns to overseas investors.
An appreciated dollar has negative impact on the emerging market debt. A rising dollar will raise questions on the economic prospects and current account deficits on emerging markets causing these currencies to plunge ( Picardo, 2019) . An increase in plunging markets will result in significant increase on the dollar denominated liabilities for emerging markets and organizations resulting in a downward spiral that may not be easy to stop.
An appreciating dollar will have a negative impact on exports thus affecting international trade. It will make imports cheaper while making exports expensive and eventually, the strong dollar will widen the trade deficit which then exerts downward pressure on the dollar itself ( Picardo, 2019) .
References
Jones, H. (2020). Which currency will come out on top in 2020? . The National. Retrieved 29 February 2020, from https://www.thenational.ae/business/money/which-currency-will-come-out-on-top-in-2020-1.960581.
Picardo, E. (2019). How A Strong Greenback Affects the Economy . Investopedia. Retrieved 29 February 2020, from https://www.investopedia.com/articles/forex/030215/how-strong-greenback-dollar-affects-economy.asp.
