- International rating company Moody's said, strong dollar would support global employment, be benefit to the cash flows of global business and reduce the deflation risk.
A stable global outlook for corporate credit quality would begin with a quickening of US expenditures and a stronger dollar exchange rate, both of which would facilitate a widening of the US trade deficit, said John Lonski, Chief Economist at Moody's, in his credit markets review.
"The stable global outlook is also predicated on an orderly slowing and rebalancing of China’s economy and the continuation of accommodative monetary policies for the purpose of reducing price deflation risks" said in the review, with "Strong dollar underpins stable outlook for credit" headline.
"Granted that a stronger dollar may be of benefit to the cash flows of businesses outside the US, the pricier greenback may have negative implications domestically" said in the the review.
"For example, the 31 percent appreciation by the US dollar against a basket of foreign currencies from 1995 into 2002 was joined by a prolonged swelling of the high yield bond spread from 1997’s 328 bp to 2002’s 839 bp."
Lonski said, "For the financial markets, waiting for the return of persistently rapid price inflation has become too much like waiting for Godot" adding that, the disinflationary implications of ample global slack and a strong dollar exchange rate would persist throughout 2015.
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