Preparing non-American markets for a strong greenback is not Janet Yellen’s job
As a symbol of how the US punches above its weight, nothing beats the pre-eminence of its currency. The US may account for just a fifth of global gross domestic product, but dollar assets make up three times as great a proportion of global reserves. Most commodity trading uses the greenback as the medium of account.
This influence is telling. A working paper from the Bank of International Settlements found almost $8tn of dollar credit issued to non US borrowers. More recently the IMF pointed out how past episodes of dollar strength have coincided with a rash of emerging market crises. Now that the greenback is surging again — the dollar index is up 20 per cent since last autumn — the implications are moving into focus.