Oliver Mangan: The dollar's strength is giving it a distinct advantage over other currencies

Traders have been testing the 20-year low of $1.04 for the euro in recent weeks.

The dollar has soared over the past year, climbing by 17% on a trade-weighted basis against a basket of peers. Higher rates are giving the dollar a distinct advantage over other currencies. 

The Fed has been the most vocal of the main central banks on the need for significant monetary tightening to dampen inflation pressures. It is guiding that official rates in the US will need to rise to 3.75% by next year, which is far higher than what is being priced in for most other markets.