Bridgewater surges on euro short

Bridgewater typically bets on dozens of markets at once, making its portfolio relatively unconcentrated. Besides the bearish euro bet, winning positions for Pure Alpha funds in January included a long bet on the Japanese yen versus a short bet on the euro. The fund also made money on long stock bets in Europe, according to the person briefed on the performance.

In February, the largest winner was a long bet on Japanese equities, plus gains on U.S. and European stocks (also long). Smaller gains were made by betting long on interest rates in the U.S. and U.K., the person said.

In March, the largest gain came from a short of the British pound versus a long on the U.S. dollar. There were also winning short currency bets on the euro, Brazilian real, Australian dollar and Canadian dollar, according to the individual. Other winners were bullish bets on stocks and interest rates from both the U.S. and Japan.

Those portfolio gains came as Dalio recently expressed concern about making big investment bets ahead of a potential interest rate increase by the Federal Reserve.

“We expect a Fed tightening and are cautious about our exposures,” Dalio and Mark Dinner of Bridgewater wrote in a private note to clients and other followers March 11.

Read MoreDalio: Fed risks toppling apple cart, 1937-style

Bridgewater’s performance far outpaces many other hedge funds.

The average macro fund is up just 3.07 percent net of fees as of April 1, according to a report by Bank of America Merrill Lynch. The average return for all hedge fund strategies was 2 percent over the same period.

Read More‘Machine’ Ray Dalio takes on ‘Man’ Bill Ackman

Factbox – How low can they go? Central bank policy easing in 2015

(Reuters) – A total of 26 central banks and monetary authorities around the world have eased policy this year, in an unprecedented wave of measures aimed at boosting growth and bolstering inflation. Below is a chronological list of the moves.

Jan. 1 UZBEKISTAN

Uzbekistan’s central bank cuts its refinancing rate to 9 percent from 10 percent.

Jan. 7/Feb. 4/March 31 ROMANIA

Romania’s central bank shaved another quarter point off its benchmark interest rate to a record low of 2.00 percent with weak inflation expanding its room to ease.

Jan. 15 SWITZERLAND

The Swiss National Bank stuns markets by scrapping its three-year-old cap on the franc’s value against the euro, leading to a surge in the currency. The de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances of 0.5 percentage points, to -0.75 percent.

Jan. 15/March 4 INDIA

The Reserve Bank of India unexpectedly lowers its policy rate for the second time this year, backing the 10-month-old government of Prime Minister Narendra Modi in its push to revive economic growth as inflation cools.

Jan. 15 EGYPT

Egypt’s central bank makes a surprise 50-basis-point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

Jan. 16 PERU

Peru’s central bank unexpectedly cuts its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

Jan. 20 TURKEY

Turkey’s central bank lowers its main interest rate, but draws heavy criticism from government ministers, who say the 50- basis-point cut, five months before a parliamentary election, is not enough to support growth.

Jan. 21 CANADA

The Bank of Canada cuts interest rates to 0.75 percent from 1 percent, where they had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

Jan. 22 EUROPEAN CENTRAL BANK

The ECB launches a government bond-buying programme which will pump over 1 trillion euros into the sagging euro zone economy, starting in March and running to September next year and perhaps beyond.

Jan. 24 PAKISTAN

Pakistan’s central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure because of falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has “shifted significantly” since its last review in October 2014.

Jan. 28 ALBANIA

Albania’s central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

Jan. 30/March 13 RUSSIA

Russia’s central bank cuts its one-week minimum auction repo rate by 100 basis points to 14 percent, less than two months after cutting it by two points to 15 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

Feb. 3 AUSTRALIA

The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

Feb. 4/28 CHINA

China’s central bank cuts interest rates for the second time in a month to fight off economic slowdown and rising deflation risks. Following a system-wide cut to bank reserve requirements in early February, policymakers follow up with a cut in benchmark interest and saving rates at the end of the month.

Jan. 19/22/29/Feb. 5 DENMARK

The Danish central bank cuts interest rates four times in less than three weeks and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

Feb. 2/March 19 COSTA RICA

Costa Rica’s central bank cuts its main interest rate by 0.25 percentage point to 4.5 percent, the second rate reduction in less than two months.

Feb. 13/March 18 SWEDEN

Sweden’s central bank cuts the key repo rate by 0.15 percentage points to -0.25 percent and says it will buy 30 billion Swedish crowns ($ 3.40 billion) of government bonds after already completing 10 billion crowns of purchases.

Feb. 17 INDONESIA

Indonesia’s central bank cuts its benchmark interest rate by a quarter of a percentage point to 7.5 percent, the first rate cut in three years.

Feb. 18 BOTSWANA

Botswana’s central bank cuts its benchmark lending rate by 100 basis points to 6.5 percent, saying the state of the economy and inflation outlook provided scope for easing monetary policy.

Feb. 23 ISRAEL

The Bank of Israel lowers its benchmark interest rate to 0.1 percent from 0.25 percent, its first reduction in six months, amid persistent deflation and a strengthening shekel.

March 4 POLAND

Poland’s central bank cuts interest rates by 50 basis points to an all-time low of 1.50 percent, to curb deflation and prevent excessive gains of its currency.

March 11 THAILAND

Thailand’s central bank cuts its benchmark interest rate by 25 basis points to 1.75 percent in a bid to spark the stubbornly sluggish economy. The cut is the first rate change in a year and expected by only five of 21 analysts in a Reuters poll.

March 12 SOUTH KOREA

South Korea’s central bank cuts interest rates for the first time in five months in a surprise move, lowering its base rate by 25 basis points to a record low of 1.75 percent.

March 12 SERBIA

Serbia’s central bank cuts its benchmark interest rate for the first time since November to 7.5 percent from 8 percent, to ward off deflation and support economic growth after a new IMF loan deal.

March 24 HUNGARY

Hungary’s central bank cuts its main interest rate for the first time in eight months, by 15 basis points to 1.95 percent, and flags further cautious easing as inflation evaporates.

(Compiled by Jamie McGeever; Editing by Larry King)

Euro down on Greece uncertainty, rate outlook drives dollar up

imageLONDON: The euro fell on Monday, hurt by uncertainty over whether Greece and its creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend and Athens sounded upbeat, but its lenders said compiling a list of reforms could take several more days. Fitch cut Greece’s credit rating to ‘CCC’ from ‘B’ on Friday.

The dollar rose after Federal Reserve chair Janet Yellen underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar rose 0.5 percent to 119.78 yen, while the euro fell 0.6 percent to $ 1.0830 as it pulls away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

The euro got little help from data that showed consumer prices in Germany picking up. Prices are set to rise in March after falling in the first two months of this year, but inflation is still likely to remain low.

“It is a lot more complicated than just looking at Germany. Yes, we need to see higher inflation in Germany, which would help a price adjustment, but at best better German data is just going to halt the euro decline rather than reverse it,” said Simon Smith, chief economist at FxPro.

For the dollar, U.S. jobs data on Friday will be the key event this week. A robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, mirroring comments after the FOMC meeting on March 18. She signalled the Fed is likely to start raising rates later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on developments in the economy.

“The jobs numbers are going to be important, but I don’t think they will be the deciding factor determining when the Fed does eventually put rates up,” Smith said.

Copyright Reuters, 2015

Greek Uncertainty Leans On The Euro

The euro fell against the greenback on Monday as uncertainty swirled over whether or not Greece’s negotiations with its international creditors will get solved in the next 21 days. It is rumored Greece will run out of cash by April 20.

Meanwhile, with Good Friday making it a holiday-shortened trading week for most currency traders, many would likely prefer to escape this month unscathed to begin the second quarter next week. However, with U.S. nonfarm payrolls (NFP) data rounding out the week, it may not be such an easy task to complete without experiencing some collateral damage.

Investors should be thankful that Group of 10 central bank activity does actually slow down considerably this week heading into the Easter break. In the U.K., the Bank of England’s policy members make it easy for investors: they have undertaken ‘self-exile’ during the U.K.’s two-month election season that is officially underway.

In the U.S., Federal Reserve members are very active on the talking circuit this week with Vice Chair Stanley Fischer speaking on Monday, and Chair Janet Yellen on Thursday. Neither is expected to give any interest rate hike clues away as both are giving introductory remarks at separate conferences. On Tuesday, Federal Reserve Bank of Richmond President Jeffrey Lacker speaks on the country’s economic outlook. This ‘hawk’ is unlikely to challenge consensus of a patient Fed waiting until September or eve
n later for it to begin raising interest rates. By the end of this week’s Fed speech circuit, investors will probably be none-the-wiser as to when and how aggressive the Fed will be with respect to interest rates.

U.S. Jobs Data in View

Capital markets will probably need to take interest rate timing clues from this Friday’s U.S. NFP report. Ever since Yellen began the process of weaning investors off central bank dependence, and nudging the market toward fundamental data reliance, the U.S. jobs report has taken on much more significance. Especially since the U.S. economy has, of late, exhibited signs of a slowdown due to excessively cold weather. Many are looking for this past winter’s cold snap to have finally taken a modest bite out of NFP (expected +247,000 versus +295,000; unemployment rate unchanged at +5.5%). If that does not happen, it could reinforce how strong the underlying U.S. labor market truly is, and will have money-market traders pricing in an earlier rate hike. Investors should remain wary of any weather-related anomalies. For a more accurate rate guidance, look to the wage growth component of the report. Until now, there has been very little sign that tighter labor market conditions are supporting wage growth.

Euro Traders Seek Direction

Last week, the EUR bounced around in a contained range twice threatening to breakthrough resistance at €1.1052, before falling back to this morning’s EUR/USD lows ahead of the psychological €1.0805 handle. On the international money market, speculative EUR short positions hit new records, suggesting more covering is likely. However, there is a clear market willingness to add or establish more EUR short positions on any U.S. dollar pullbacks. The EUR bear must be feeling fairly confident with their short positions, especially with the lack of EUR bounce follow through considering the depth of the record short positions.

FOREX-Euro down on Greece uncertainty, rate outlook drives dollar up

* Dollar up 0.6 percent against yen and euro

* Euro weighed down by uncertainty over Greece

* Yellen’s message on gradual tightening provides no fresh impetus (Updates prices, quotes)

By Ahmed Aboulenein

LONDON, March 30 (Reuters) – The euro fell on Monday, hurt by uncertainty over whether Greece and its creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend and Athens sounded upbeat, but its lenders said compiling a list of reforms could take several more days. Fitch cut Greece’s credit rating to ‘CCC’ from ‘B’ on Friday.

The dollar rose after Federal Reserve chair Janet Yellen underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar rose 0.5 percent to 119.78 yen, while the euro fell 0.6 percent to $ 1.0830 as it pulls away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

The euro got little help from data that showed consumer prices in Germany picking up. Prices are set to rise in March after falling in the first two months of this year, but inflation is still likely to remain low.

“It is a lot more complicated than just looking at Germany. Yes, we need to see higher inflation in Germany, which would help a price adjustment, but at best better German data is just going to halt the euro decline rather than reverse it,” said Simon Smith, chief economist at FxPro.

For the dollar, U.S. jobs data on Friday will be the key event this week. A robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, mirroring comments after the FOMC meeting on March 18. She signalled the Fed is likely to start raising rates later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on developments in the economy.

“The jobs numbers are going to be important, but I don’t think they will be the deciding factor determining when the Fed does eventually put rates up,” Smith said.

(Additional reporting by Anirban Nag; Editing by Larry King)

Euro hurt by Greek uncertainty, dollar helped by rate outlook

The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.

The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.3 percent to 119.50 yen, while the euro fell 0.6 percent to $ 1.0830, having in the last two weeks pulled away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later.

FOREX-Euro hurt by Greek uncertainty, dollar helped by rate outlook

* Dollar firmer vs yen and euro

* Euro weighed down by uncertainty over Greece

* Yellen’s message on gradual tightening provides no fresh impetus (Recasts, fresh quotes, updates prices)

By Anirban Nag

LONDON, March 30 (Reuters) – The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.

The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.3 percent to 119.50 yen, while the euro fell 0.6 percent to $ 1.0830, having in the last two weeks pulled away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She signalled the Fed will likely start raising borrowing costs later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

Still, the diverging rate pathways between the Fed and most of the developed world meant the dollar should stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

(Additional reporting by Masayuki Kitano; Editing by Susan Fenton)

FOREX-Dollar supported even as Yellen drives home message of patience

* Dollar firmer vs yen and euro

* Yellen’s message on gradual tightening provides no fresh impetus

* Commodity currencies continue to underperform (Adds comments, updates prices)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, March 30 (Reuters) – The dollar inched higher versus the yen and euro on Monday after the head of the U.S. Federal Reserve underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.1 percent to 119.24 yen. It has fallen more than 2 percent from a near eight-year peak of 122.04 set early this month.

The euro slipped 0.2 percent to $ 1.0873, having in the last two weeks pulled up from a 12-year trough of $ 1.0457.

In a highly anticipated speech on Friday, Fed Chair Janet Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18.

She said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

The diverging interest rate pathways between the Fed and most of the developed world meant that the dollar should in general stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

“We expect the Fed to start hiking rates possibly by the September FOMC and the process will likely be gradual,” he said, adding that the dollar would probably stay strong heading into the start of the Fed’s policy tightening cycle.

A key event for the dollar this week is U.S. jobs data on Friday.

Commodity currencies edged lower, partly unsettled by further falls in oil and iron ore prices last Friday, when oil prices slid 5 percent. On Monday, benchmark Brent crude oil futures slipped 0.5 percent to $ 56.13 a barrel.

The Aussie eased 0.3 percent to $ 0.7729, continuing to retreat from a two-month peak of $ 0.7939 set a week ago. It was nearing a six-year trough of $ 0.7561 plumbed early this month.

(Editing by Eric Walsh & Kim Coghill)

Sterling weaker on subdued inflation outlook, looming election

By Ahmed Aboulenein

LONDON, March 25 (Reuters) – Sterling fell against the euro on Wednesday, hitting a one-month low as investors pushed back expectations of interest rate hikes amid growing talk that inflation in Britain will stay low for sometime to come.

Annual inflation in Britain dropped to zero in February and investors are factoring in the chance of a first rate hike in mid-2016, having pushed it back from early 2016 last week.

BoE policymaker Kristin Forbes said on Wednesday that the low rate of inflation was unlikely to persist, so interest rates would need to rise as the economy recovers, but her comments appeared to have little impact on the pound.

Bank of England Chief Economist Andy Haldane said last week the bank should be ready to cut rates further if inflation looked likely to stay below its 2 percent target. The next policy move was as likely to be a cut in rates as a hike, he said.

Those comments echoed a cautious tone from the BoE’s monetary policy committee in minutes from its latest meeting released last Wednesday, where members flagged the impact of a strengthening pound on inflation.

The pound was down 0.1 percent to 73.66 pence per euro and against the dollar it was up 0.4 percent at $ 1.4900. The euro was also helped by a robust survey of German business morale.

“Our view is that the BoE won’t be hiking interest rates until February 2016 at the earliest and the current inflation outlook suggests the hike can come later rather than earlier. Consequently you have a movement higher in euro/sterling,” said Jane Foley, senior currency strategist at Rabobank in London.

“There is another factor: the approach of the British general election. The market is becoming more aware as we get closer that there could be, potentially, a significant period of time before a coalition is in place.”

Britain holds a parliamentary election on May 7 and the latest opinion polls point to a ‘hung parliament’, in which no single party can form a government on its own.

“Sterling is going to weaken in the next month because of election risk. Our forecast for cable (dollar/sterling) is $ 1.42 and for euro/sterling to trade higher in the short term. It will recover after the election,” said Phyllis Papadavid, senior global FX strategist at BNP Paribas in London.

“There is a lot of political news coming out of the UK, there is some economic news. The BoE Monetary Policy Committee members have sounded more dovish as well.” (Editing by Crispian Balmer)

Project Syndicate: How far will the euro fall?

LONDON (Project Syndicate) — The U.S. dollar is hitting new 12-year highs almost daily DXY, -1.28%  , while the euro EURUSD, +1.50%  seems to be plunging inexorably to below dollar parity. Currency movements are often described as the most unpredictable of all financial variables. But recent events in foreign-exchange markets seem, for once, to have a fairly obvious explanation — one that almost all economists and policy makers accept and endorse.

French President François Hollande, for one, has ecstatically welcomed the plunging euro: “It makes things nice and clear: one euro equals a dollar,” he told an audience of industrialists. But it is when things seem “nice and clear” that investors should question conventional wisdom. A strong dollar and a weak euro is certainly the most popular bet of 2015. So is there a chance that the exchange-rate trend may already be overshooting?

Also read: The dollar’s meteoric rise may be just about over

In one sense, the conventional explanation of the recent euro-dollar movement is surely right. The main driving force clearly has been monetary divergence, with the Federal Reserve tightening policy and the European Central Bank maintaining rock-bottom interest rates and launching quantitative easing. But how much of this divergence is already priced in? The answer depends on how many people either are unaware of the interest-rate spread or do not believe that it will widen very far.

Last year, many investors questioned the ECB’s ability to launch a bond-buying program in the face of German opposition, and many others doubted the Fed’s willingness to tighten monetary policy, because doing so could choke off the U.S. economic recovery. That is why the euro was still worth almost $ 1.40 a year ago — and why I and others expected the euro to fall a long way against the dollar.

But the scope for dollar-bullish or euro-bearish surprises is much narrower today. Does anyone still believe that the U.S. economy is on the brink of recession? Or that the Bundesbank has the power to overrule ECB President Mario Draghi’s policy decisions?

With so much of the monetary divergence now discounted, perhaps we should focus more attention on the other factors that could influence currency movements in the months ahead.

On the side of a stronger dollar and weaker euro, there seem to be three possibilities.

One is that the Fed could raise interest rates substantially faster than expected. Another is that investors and corporate treasurers could become increasingly confident and aggressive in borrowing euros to convert into dollars and take advantage of higher U.S. rates. Finally, Asian and Middle Eastern central banks or sovereign wealth funds could take advantage of the ECB’s bond-purchase program to sell increasing proportions of their German, French, or Italian debt and reinvest the proceeds in higher-yielding U.S. Treasury securities.

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These are all plausible scenarios. But at least four factors could push the dollar-euro exchange rate the other way.

First, there is the effect of the strong dollar itself on the U.S. economy and its monetary policy. If the dollar continues to rise, U.S. economic activity and inflation will weaken. In that case, the Fed, instead of raising interest rates faster than expected, will probably become more dovish.