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For a rough-and-ready guide to the dollar's impact on the US economy, have a look on Google Trends at the frequency of news headlines containing the term "strong dollar" over the past 12 months.As the Fed meets next week to address when to raise rates, the dollar dominates its attention. That is because its focus has shifted from worrying about the impact of a strong dollar on the US economy to its impact on the rest of the world.Dollar strength gave the Fed pause for thought, worried about the impact on US exporters. The US corporate earnings season was full of headlines about the negative impact of the strong dollar on the likes of Nike, Johnson & Johnson and Procter & Gamble.Reason two – weaker though it now is, the dollar remains strong enough to have a serious impact on other parts of the world, specifically emerging markets as capital flows back to the US and China moves to devalue the renminbi.If this linkage – between the US and the rest of the world, the dollar and other currencies – worries the Fed so much, will it also be concerned about the prospect of a US rate rise driving up the dollar, thereby inflicting more pain on EMs?
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