The U.S. dollar continues to soar: What that means for the stock market and investors

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Amid all of this year's wild volatility in financial markets, there's one undisputed winner: the U.S. currency.

Amid all of 2022’s wild volatility, there’s one thing that investors can still count on: the soaring U.S. dollar.The ICE U.S. Dollar Index DXY, which measures the U.S. currency’s strength against a basket of six other currencies, rose 0.7% on Wednesday, as the greenback continued to thrash major counterparts like the yen USDJPY and pound GBPUSD, while generally wreaking havoc all over the world.

Read: A rampaging U.S. dollar just booked its strongest quarter in at least 7 years as investors search for safety Around the world, this interest-rate differential is weakening a swath of currencies against the dollar as a result. DXY explained There’s a number of ways to judge the dollar’s performance and one of the most common is by using the ICE U.S. Dollar Index, which is calculated about every 15 seconds from a feed of spot prices on different currencies. Six currencies — the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc — are weighted against the dollar to come up with a calculation of how the U.S. currency is performing.

Based on one reported estimate from Credit Suisse Group AG, every 8% to 10% jump in the dollar leads to, on average, a roughly 1% hit to U.S. companies’ profits.American corporations have been lamenting the greenback’s rise since at least June and this week brought more indications of how much the strong dollar is taking a toll.

 

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