25 Cents – United States

In 2018, the United States currency situation was characterized by a period of monetary policy normalization and a strong U.S. dollar, set against a backdrop of robust economic growth. The Federal Reserve, under Chairman Jerome Powell, continued the tightening cycle it began in 2015, raising the benchmark federal funds rate four times over the year to a target range of 2.25% to 2.50%. This was driven by a strong labor market, solid GDP growth fueled by the 2017 Tax Cuts and Jobs Act, and a conscious effort to move interest rates away from the near-zero emergency levels of the post-2008 era. Concurrently, the Fed continued to gradually reduce its massive balance sheet, a process known as quantitative tightening, which further removed liquidity from the financial system.

The dollar's strength was a defining feature of 2018, with the U.S. Dollar Index (DXY) rising approximately 4.5% over the year. This appreciation was fueled by the Fed's comparatively hawkish stance at a time when other major central banks, like the European Central Bank and the Bank of Japan, maintained more accommodative policies. The "America First" trade agenda of the Trump administration also played a significant role, as escalating tariffs and trade tensions with China and other partners created global uncertainty. Investors often flocked to the dollar as a safe-haven asset during periods of market stress, further bolstering its value.

However, this environment presented significant crosscurrents. The stronger dollar made U.S. exports more expensive abroad, hurting some manufacturers and farmers, and also tightened financial conditions for emerging markets with dollar-denominated debt. By the fourth quarter, concerns emerged that the Fed's tightening, combined with fading fiscal stimulus and the ongoing trade war, could slow the economic expansion. These fears contributed to a sharp equity market sell-off in December, which led President Trump to publicly criticize the Fed's rate hikes and prompted investors to question whether the central bank would pause its tightening cycle in 2019.