In times of trouble, the dollar is the world’s refuge and strength. This is true even when the US is the source of the trouble, as happened in the financial crisis of 2007-09. It is true again now. A series of shocks, including high inflation in the US, has triggered a familiar upward movement in the dollar. Moreover, this has not been just against the currencies of emerging economies, but also against those of other high-income countries. Meanwhile, the general story of the dollar cycle underlies some specific ones. Messing up one’s macroeconomic policies, especially fiscal management, proves particularly dangerous when the dollar is strong, interest rates are rising and investors seek safety. Kwasi Kwarteng, please note.

The nominal effective exchange rate of the US dollar appreciated by 12 per cent between the end of last year and Monday, according to JPMorgan estimates. Over the same period, the yen’s effective rate depreciated by 12 per cent, the pound’s by 9 per cent and the euro’s by 3 per cent. Against the dollar alone, movements are larger: sterling has depreciated by 21 per cent, the yen by 20 per cent and the euro by 16 per cent. The dollar is king of the castle.

So why has this happened? Does it matter? What can be done about it?