NEW YORK (AP) — The buck isn’t stopping.
The value of the U.S. dollar has been on a tear for more than a year against everything from the British pound across the Atlantic to the South Korean won across the Pacific.
After rising again Friday, the dollar is near its highest level in more than two decades against a key index measuring six major currencies, including the euro and Japanese yen. Many professional investors don’t expect it to ease off anytime soon.
The dollar's rise affects nearly everyone, even those who will never leave the U.S. borders. Here’s a look at what’s driving the U.S. dollar higher and what it can mean for investors and households:
WHAT DOES IT MEAN TO SAY THE DOLLAR IS STRONGER?
Essentially that one dollar can buy more of another currency than it could before.
Consider the Japanese yen. A year ago, $1 could get a little less than 110 yen. Now, it can buy 143. That’s about 30% more and one of the biggest moves the U.S. dollar has made against another currency.
Foreign currency values are constantly shifting against each other as banks, businesses and traders buy and sell them in time zones around the world.
The U.S. Dollar index, which measures the dollar against the euro, yen and other major currencies, has climbed more than 14% this year. The gain looks even more impressive compared against other investments, most of which have had a dismal year. U.S. stocks are down more than 19%, bitcoin has more than halved and gold has lost more than 7%.
WHY IS THE DOLLAR STRENGTHENING?
Because the U.S. economy is doing better than others.
Even though inflation is high, the U.S. job market has remained remarkably solid. And other areas of the economy, such as the services sector, have been resilient..