Continued rise for eight weeks! The US Dollar Index achieves the longest weekly increase in eighteen years.

Investors seem to be ignoring the sluggishness of the US economy and the Federal Reserve's intention to maintain high interest rates for a long time. As of the week ending September 8th, the US dollar index has risen for eight consecutive weeks, setting a record for the longest continuous increase in nine years. The spot US dollar index has even reached its longest continuous increase since its introduction in 2005.

The Bloomberg US Dollar Index has risen for eight consecutive weeks, causing its 14-day relative strength index to break through 70. Some investors on Wall Street believe that this is a sign of the US dollar being overbought. The US dollar remained almost unchanged on Friday.

Over the past month, all major currencies have depreciated against the US dollar, especially emerging market currencies, with the Indian rupee and other currencies hovering near historic lows. The recent rise of the US dollar reflects the cracks appearing in the global economy. Despite the slowdown in Europe and the Asia-Pacific region, the US economy is still accelerating.

Matt Maley, Chief Market Strategist at Miller Tabak + Co, said:

The US dollar has become quite overbought and favored. Therefore, the time for a pullback has come. Market optimism towards the US dollar has reached extreme levels, so there will be no more buyers pushing the US dollar higher in the short term. Short-term traders should be cautious about holding long positions in the US dollar.

Laura Cooper, Senior Investment Strategist at BlackRock, said that the rise of the US dollar is surprising:

We question the sustainability of this situation, mainly because we expect the Federal Reserve to pause its rate hikes.

In contrast to the above views, analysts at HSBC believe that given the weak global economic outlook, the US dollar, as the world's reserve currency, will continue to strengthen next year:

The era when the US dollar became an important reserve currency that everyone needs to pay attention to has returned. Its dominant position in global trade may last longer. As the tightening policies of major central banks around the world begin to take effect and the prospects for global economic growth become shaky, this should further support the counter-cyclical rise of the US dollar.

Even if the global outlook becomes gloomy, the United States appears relatively more attractive, and the US dollar can withstand any easing policy cycle of the Federal Reserve.

Behind the strength of the US dollar, the euro has fallen for eight consecutive weeks, as the gap between the recession in the eurozone and the strong growth of the US economy continues to widen. Thursday's data showed that German industrial production, which is traditionally the growth engine of the eurozone, declined for the third consecutive month in July. In contrast, the US labor market remains resilient, with initial jobless claims unexpectedly declining.

In recent weeks, following a series of weak economic data in the eurozone, second-quarter economic growth has been revised down from 0.3% to 0.1%, and business surveys show further slowing of economic growth in August.

Kit Juckes, strategist at Societe Generale, commented that the US economy is currently very resilient, while European data is very weak, which is one factor contributing to the excessive strength of the US dollar. Morgan Stanley's Global Macro Strategy Director, Matthew Hornbach, also mentioned this difference, stating that global economic growth will definitely weaken, especially in Europe, while the US economy seems to be showing resilience. This interest rate differential situation is indeed favorable for the US dollar.