ARK Invest CEO Cathie Wood suggests the US dollar may appreciate significantly in the coming years. According to her analysis, the traditional US Dollar Index (DXY) is outdated. ARK Invest prefers the Federal Reserve’s broader index, which tracks 26 countries and updates annually. By this metric, the dollar has risen 36% since August 2008 and currently trades 44% above its long-term average.
Wood attributes this potential strength to tax incentives for domestic manufacturing and data centers, alongside expected monetary discipline from Fed Chair Kevin Warsh. In September, the DXY saw its best monthly performance since June, increasing by nearly 2%. Wood draws parallels between current market conditions and the early 1980s, when high domestic returns drove the dollar upward.
The strengthening dollar poses questions for gold and Bitcoin. Gold has declined from its January peak of $5 602 to approximately $4 140. While Morgan Stanley analyst Amy Gower identifies $4 000 as a key support level, Wood believes tighter monetary policy could further impact gold's purchasing power, which has dropped 92% against the dollar since 2002.
Bitcoin's recent performance presents a potential shift in market behavior. Despite the dollar's rise, Bitcoin gained 6.14% in September. Historically, Bitcoin has struggled during periods of dollar strength. If this divergence ends and Bitcoin begins to decline, Wood’s thesis regarding a stronger dollar could present significant challenges for cryptocurrency investors.
