amid all of 2022s wild volatility theres one thing that investors can still count on the strong us dollarthe ice us dollar index  which measures the us currencys strength against a basket of six other currencies is up 195 in the past 12 months with the greenback thrashing major counterparts like the yen and pound  while generally wreaking havoc all over the world this comes at a time when all three major stock indexes are nursing doubledigit percentage losses this year global government bonds have been stuck in one of their greatest bear markets ever and even gold has had a choppy yearread a rampaging us dollar just booked its strongest quarter in at least 7 years as investors search for safetyto understand why the dollar is outperforming other assets by so much even as projections point to 100 certainty of a us recession in the next 12 months its useful to take a step back first currencies always trade relative to whats going on everywhere else in the world and right now rapidly rising us interest rates compared with other countries are the major reason the dollar is appreciating in technical parlance thats known as the interestrate differential or difference in monetary policy among central banks the federal reserve is standing resolute in its efforts to bring down inflation with continued aggressive rate increases especially after septembers hotterthanexpected consumerprice index produced an 82 yearoveryear headline rate meanwhile europe which reported a 99 annual inflation rate for september on wednesday  is facing an energy crisis which according to the international monetary fund puts the european central bank on a shallower path for interest rates and in asia stilllow inflation in japan and china has enabled central banks there to buck the global tightening trend around the world this interestrate differential is weakening a swath of currencies against the dollar officials in one country japan are so alarmed by the depreciation of their currency against the dollar that theyve made fresh threats of intervention after the yen briefly tumbled past the key level of 150 per dollar early thursday though theres been debate about whether a broader coordinated intervention along the lines of the 1985 plaza accord should take place analysts doubt it one big reason is that a strong dollar helps to hold down inflation domestically by reducing the cost of imports and is thus helping the fed do its job to some extentreadsoaring us dollar spikes above key 150 yen level as japanese currency slides to 32year low and why a soaring dollar is raising questions  and doubts about a plaza accordstyle intervention the struggle right now is the speed with which this dollar strength has happened where it can become intense and problematic said tom nakamura a portfolio manager and currency strategist at agf investments in toronto which managed c384 billion 281 billion as of september such a strong move can trigger a liquidity or credit crisis as companies in other countries try to meet their dollardenominated obligations i dont believe that its come to that point yet but speed is something that is important whether its in the foreignexchange market or interest rates because theres an adjustment process the faster it happens the less likely economies around the world can adjust to it and absorb it smoothly he said theres a number of ways to judge the dollars performance and one of the most common is by using the ice us dollar index which is calculated about every 15 seconds from a feed of spot prices on different currencies six currencies  the euro japanese yen british pound canadian dollar swedish krona and swiss franc  are weighted against the dollar to come up with a calculation of how the us currency is performing the index has rallied 17 in 2022 and was trading just 14 below a morethantwodecade high set in late september according to factsetinterestingly brent crude is the only asset this year thats managed to outperform the us dollar index according to figures provided on monday by the blackrock investment institute the research arm of the worlds largest money manager you may have recently heard the dollar described as a wrecking ball and its easy to see why for one thing foreign governments and private corporations have trillions in dollardenominated debt that theyre struggling to pay back for another us multinationals which do business in multiple countries are seeing their profits and sales erode based on one reported estimate from credit suisse group ag every 8 to 10 jump in the dollar leads to on average a roughly 1 hit to us companies profits readinflation is yesterdays news a strong dollar is next big threat for us multinationalsamerican corporations have been lamenting the greenbacks rise since at least june and this week brought more indications of how much the strong dollar is taking a tolljohnson  johnson jnj said it is seeing pressure from the us currency and cut its sales forecast for the year even though it reported thirdquarter earnings that beat estimates streaming giant netflix nflx linked the dollars strength to a weaker fourthquarter outlook and procter  gamble pg blamed the greenback and rising inflation for fiscalyear earnings that will likely be at the low end of the companys own forecastsjames solloway chief market strategist at sei which oversees about 13 trillion in assets said he wouldnt be surprised to see a temporary reversal in the dollars trend meanwhile a team at jpmorgan chase  co said that with investors fleeing almost every asset class this year and cash on the sidelines reaching a 10year high we stay long the dollar as a hedge to a hawkish fed in the nearterm though its not always the case analysts say the strong dollar has clearly exacerbated the headwinds facing the us stock market this year its a clear negative for the sp 500 with industrials materials consumer staples and technology being the most sensitive to a stronger us currency according to a report by rbc capital markets by contrast stocks in sectors like financials utilities and realestate investment trusts should be more insulated it saidreadus dollars dominance tends to hurt these sectors of the stock market less says rbc and the dollar keeps hitting new highs the stock market doesnt like it at least theres paris investors with throbbing headaches from the stockmarkets doubledigit losses in 2022 can be forgiven for wanting to just get away from it all if theyve still got the money to do it todays strong dollar is benefiting american travelers when it comes to booking hotel stays and paying for food plus fun excursions in europe the uk japan and just about everywhere else see the strong dollar is making european travel very attractive right now  with one important caveatsome of the cheapest places to travel on the us dollar include costa rica vietnam and romania  although anywhere outside the 50 states will do some wellheeled americans are even going further by splurging on european homes where a single purchase can end up being tens of thousands of dollars cheaper than it was earlier this yearthe concept of dollar strength can be good in different situations nakamura of agf investments said via phone on wednesday it could lessen inflation pressures that would have been stronger otherwise domestically foreign exporters can benefit from weaker currencies relative to the dollar which means that americans can enjoy cheaper imported goods for the average american they can also benefit from a dollar that stretches further if they travel abroad