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| As the fed raises the fed funds rates it also raises the yield on treasuries. you can get more than 3% return with very little risk. In fact the lowest risk in the world which attracts investors across the globe. You need dollars to buy US treasuries therefore the dollar is in demand more than any other currency.
It puts pressure on other governments to also raise rates to manage the exchange rate implications especially if they are a major exporter to the us.
A strong dollar also helps cool the economy via making imports cheaper therefore lowering inflation. | |
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King dollar
