3 reasons why the U.S. dollar is strengthening: Strategist

The U.S dollar's strength against other currencies is wreaking havoc in markets around the world and sending equity prices lower.

American travelers overseas are getting their bang for their buck, but multinationals which derive part of their revenue in foreign countries are bringing in fewer dollars due to exchange rates.

The dollar is strengthening for several reasons, explains Moody's Investors Service managing director Atsi Sheth.

"Any time you have uncertainty and geopolitical risks, and macro economic uncertainties around the world, the dollar benefits as safe haven status," said Sheth.

"The second is, the Fed has been much more aggressive in hiking rates than its peer banks, whether it's the ECB (European Central Bank) or the Bank of Japan," she added.

Sheth also mentioned the British pound, which plunged to knew lows against the dollar this week.

"There are idiosyncratic reasons for that particular currency to be very volatile in the last couple of days," said Sheth.

"Dollar strength is here for a while, as long as that interest rate differential remains, as long as that uncertainty remains," she said.

On Tuesday, stocks opened higher as the Dollar Index (DX-Y.NYB) took a pause from its recent rally. Equities however turned negative as treasury yields rose, and DXY rose above 114 once again.

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre

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