The dollar's surge to multi-year highs against a range of currencies in recent weeks is making many foreign economic policymakers happy.
Indeed, they have sought to devalue their own currencies to boost exports and thus spark their stagnant economies.
But be careful what you wish for, says Lawrence McDonald, head of U.S. macro strategy at Societe Generale. "The dollar is creating tremendous systemic risk," he tells
CNBC.
One problem is that the rising dollar is contributing to the plunge of oil prices to 5 ½-year lows, as oil is priced in dollars.
"As the dollar goes higher, it drives oil lower," he said. And that hurts oil producers, of course. "Russia is now junk [in its credit rating], but it's not just Russia," McDonald notes. "If you look at the corporate debt market, and the number of companies that are tied to Russia's fate, you just have a situation where there's too much systemic risk that's tied to oil."
And most important, a rising dollar won't be enough to buoy economies overseas, he explains. "The U.S. is no longer strong enough to hold up the globe."
Doug Oberhelman, CEO of Caterpillar, whose fourth-quarter earnings were hit hard by the dollar's ascent, is worried too.
"The rising dollar will not be good for U.S. manufacturing or the U.S. economy," he said in a conference call with analysts and investors this week,
The Wall Street Journal reports.
A strong dollar reduces the revenue earned by U.S. companies overseas, because that revenue is now worth less when converted from foreign currencies into dollars. A rising greenback also depresses U.S. companies' exports by making them more expensive in foreign currency terms.
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