Last week the dollar appreciated aggressively and made large gains against most currencies in both advanced and emerging markets. In fact, year to date the USD has outperformed against a wide basket of currencies. In theory, this should not be the case. At the start of the year, markets expected that the Fed would cut interest rates only once, by 25bps, to bring the Fed funds rate to 1.5% by the end of 2020. However, recently the Fed cut rates to 0.0% – 0.25% with two emergency rate cuts in as many weeks. Theoretically then, the USD should have depreciated,…

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