— This is the script of CNBC's news report for China's CCTV on March 12, Thursday.
It's been a fast a furious rise for the U.S. dollar and many market watchers expect it to continue to get higher. Here's a look at 3 ways this dollar rally is unlike anything we've seen before. Firstly, it is the speed. According to Bank of America of Merrill Lynch, the last six months, we have seen the second fastest dollar rally in 40 years. Number one was during the financial crisis, whem the world piled into the dollar in a massive rush to find safe shelter.
What is also unusal, is having a negative impact on stocks, After climbing hand-in-hand last year, the dollar and stocks have broken up.
They are now moving in opposite direction.
And investors worry about the impact of such a major move on the economy.
[JONATHAN GOLUB, Chief U.S. Market Strategist & MD at RBC Capital Markets] "Eveyrone is focussed on the damage that gets done to earnings because of the dollar and thats true thats a real issue, the positive impact on PE multilples is actualy much bigger and more important. interestinly the Us small caps dont get flows because when money flows into the Us it goes into those mega caps. soi large cap actualy outperforms in those periods of that rising dollar."
Third, you have got the Federal Reserve moving in the opposite direction as nearly as every other major central bank, and even minor central banks. More than 20 other central banks this year, have cut interest rate or eased policy unprecedented at the time of US, it is thinking of actually lifting interest rates. That is why the dollar surges and it is unique. It could prove to be more risky and harmful than other dollar rally in the past.
However, a strong USD is a good news for European exporters. CNBC's Phil LeBeau tells us how a stronger dollar and weaker euro will affect German automakers.
Here in Europe, one of the main topics of conversation both with conusmers as well as business leaders is the weakness of the Euro relative to the US dollar. In fact, the Euro once again weakened today in fact it is now on 20 year lows relative to the dollar.
It's moving closer to parody and there's actually some discussion here in Germany in XX Europe on whether or not we see the Euro at parody with the dollar or perhaps even dropping below, maybe even down to 0.9 or 0.85. 012226 It has happened before, go back to 2002 and the Euro and the dollar were briefly at parody.
What does this mean for manufacturers here in Europe? Well it certainly makes it easier for them to export their goods to the United States.
One of their primary exports that we get a lot of questions about, is whether or not it makes European made automobiles more attractive and therefore more profitable for German automakers.
We're at the VW Auto here at the headquarters here in Wolfsburg Germany and while there is some benefit for volkswagen in the porches that are sold in the US or the Audis that are sold in the US that are built here in Europe, keep in mind that the vast majority of European brand vehicles sold in the US are built in the US. 012310 About 6% roughly a million vehicles are built here in Europe, and sold in the US. Certainly it's more profitable to do so right now for the European automakers, but keep in mind,
that's a very very small percentage of their overrall global sales and the windfall if you will or the benefit of that weaker Euro? Well it's fairly limited. That's the story involving the Euro and the dollar trade here in Wolfsburg Germany, back to you.
CNBC Qian Chen, reporting from Singpaore.