The Dollar Hits a Four-Year High in the Global Markets

A senior technology executive with more than two decades of experience working within the financial sector, Rao Chalasani most recently served as the business CTO and director of trading risk management at Bank of America-Merrill Lynch in New York, NY. Currently residing in New Jersey, Rao Chalasani created the Enterprise Risk Management System while at BofA, in addition to assisting with global market trading. He still enjoys following markets in his free time.

Global equity markets recently experienced a sharp drop due to the dollar index hitting a four-year high, indicating a potential loss in earnings. The dollar index rose 6.3 percent to 85.485, causing many oil and commodity prices to decrease. It also created a sell-off on Wall Street that dropped the S&P 500 benchmark index by 1.6 percent. Companies within the S&P 500 earn up to 50 percent of their revenue from overseas, so the large gain seen on the dollar index will greatly impact their earnings for the quarter.

The euro also saw changes, falling as low as $1.269 on the trading platform EBS. This was largely the result of the increased yield gap between German and U.S. bonds, which plays a key role in exchange rates. As a result of these changes, Wall Street stocks dropped by over 1.5 percent, pushing the MSCI’s all-country index down 1.2 percent. The Dow Jones industrial average and Nasdaq Composite also lost points, closing down 1.54 and 1.94 percent, respectively.

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