AEP: US dollar plunges as world plays dangerous game of pass the parcel

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This is a massive shift in sentiment since the end of last year when investors were betting heavily that the US Federal Reserve was on track for a series of rate rises, which would draw a flood of capital into dollar assets. Markets have now largely discounted a rate rise in June, and are pricing in just a 68pc likelihood of any increases this year.

... it increases the pain for the eurozone and Japan as their currencies rocket. The world is in effect playing a high-stakes game of pass the parcel, with over-indebted countries desperately trying to export their deflationary problems to others by nudging down exchange rates.

... There is little that the Bank of Japan or the ECB can do to arrest this unwelcome appreciation. The Obama Administration warned them at the G20 summit in February that it any further use of negative interest rates would be regarded by Washington as covert devaluation, and would not be tolerated.

... Stephen Jen from SLJ Macro Partners said the Fed is pursuing a "weak dollar policy", reacting to global events in a radical new way. "They are forcing currency appreciation onto weaker economies. It is irrational," he said.