The dollar is making us nervous.

"On 24 January, Team Trump made official its plan to end the 23-year-old strong dollar policy," wrote W Pesek. Treasury Secretary Steven Mnuchin rocked the currency world when he said: 'A weaker dollar is good for us as it relates to trade and opportunities'." That is surely not true. In December 2008 the Federal Funds rate was reduced to  zero to 0.25%  and, at the same time, the Federal Reserve resorted to a bond buying program, known as quantitative easing, to massively increase liquidity in the market, expanding its balance sheet to $4.44 trillion. The dollar fell against the Euro, reaching nearly 1.60 at one point before strengthening to near parity by 2016. Zero interest rate, or ZIRP, was criticised because it failed to stimulate inflation, but increased asset prices instead. The reason the dollar became stronger maybe because other central banks resorted to negative interest rate policy, or NIRP, so that by 2016 Switzerland, Denmark, Sweden, Japan, and the 19 countries of the Eurozone all had negative interest rates. On the other hand, Trump appointed Lawrence Kudlow as his top economic adviser. "Kudlow is a supply-side ideologue, a cheerleader for the dogma of low taxes, less regulation, free trade and a strong currency." So all is not lost. When central banks compete to go lower than each other they cancel out any benefits that may have occurred. Since ZIRP and NIRP are not working maybe it is time for RIRP, or Restrictive Interest Rate Policy, mocked VA Nageswaran. The Federal Open Market Committee, under new Chairman Jerome Powell, just increased the funds rate by 25 basis points to 1.5-1.75%. Although, inflation is still low in the US some members of the FOMC favor an extra rate hike this year which may cause problems in Asia as fund managers transfer money from Asian bonds to the US. That will make the dollar stronger relative to other currencies. A strong growth in the US will pull other economies higher, but higher interest rates will put severe strain on companies which have borrowed in dollars. Asian countries hold huge amounts of dollar reserves. China added $127 billion in US treasuries, while India added $27 billion recently. If the dollar falls the value of their holdings will also drop. Foreign portfolio investors have pulled half a billion dollars out of Indian bonds in the last three weeks. If US interest rate goes up faster more money could leave which would make the rupee weaker and increase inflation. Bond yields have surged by 100 basis points in the last six months, wrote A Iyer. This will raise the government's borrowing costs. A weak dollar hurts Asian trade, while a strong dollar hurts currencies. How to stay in balance?