Analysis: As U.S. economy’s exceptionalism fades, so does the dollar

LONDON, May 25 (Reuters) – The dollar’s rally to two-decade highs appears to have stalled, with doubts growing on whether the U.S. economy will prove as resilient and monetary policy as aggressive as previously expected.

After climbing 10% in three months, the greenback has slipped 3% since May 13. Some reckon that’s because the safe-haven bid sparked by the Russia-Ukraine war has now ebbed. Others say that if the Federal Reserve were to tighten monetary policy significantly it would risk propelling the U.S. economy into recession.

And finally, while U.S. rate hikes will still outpace those in other major economies, there are signs that rate-hike laggards in the euro zone and Switzerland are readying their own policy-tightening campaigns.

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On Monday, European Central Bank President Christine Lagarde dealt the dollar a blow, flagging that the bloc’s 8-year long experience with negative interest…

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