The global financial cycle is driven by the demand for safe dollar assets. This demand influences patterns of dollar borrowing, currency mismatch, and the U.S. external balance sheet. The U.S. monetary policy has spillover effects on the rest of the world and the dollar serves as a global risk factor. The model developed in the study shows how U.S. monetary policy impacts the currency market and the global economy, highlighting the interconnectedness of the global financial system.