Should we worry about dollar strength?

The surge in the US dollar to multi-year highs has triggered many worries, including the threat to the US recovery, heightened risks of global deflation via the impact on commodity prices, and the potential damage to emerging economies. All of these fears are overdone. Instead, we would view dollar strength as the natural consequence of current divergences in economic performance and in the prospects for monetary policy. If anything, it should be welcomed as helping to reduce global imbalances.