The dollar goes up when we have gray bars

Reading the Dollar Doldrums

Right there on the chart, the blue line. It spikes at gray bar time.

When the recession hits, there is a rush to liquidity. Then, latter,  the foreign hot money recedes as it finds other places that do not have a 1.5% seigniorge tax.  

Note the underlying anti-correlation between the ten year and the dollar.  But if you lag the dollar index a bit they tend to line up. So this still seems to be a delay due to reserve currency status. There is an extra step through the currency markets.

Future?

The Fed just announced that seigniorage taxes will be going up, soon nd Treasury began buying more long term debt at higher interest charges.  If Powell holds to his promise than there is slightly more dollar depreciation as Fed taxes go up.  We are in for a long struggle to get out of this Fed tax mess and it is hitting banks pretty badly.

The author, MOHAMED A. EL-ERIAN, doesn't like the extra step that moves money back and forth during sudden downturns. It seems like unnecessary volatility.