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What the heck is going on?
The answer is in two parts. First, a lot of traders think the inflation is peaking, and thanks to aggressive rate hikes, will start falling next year. Some of them are placing bets on that scenario.
Secondly, and IMO probably more significantly, as bad as things are here, they are significantly worse elsewhere. Europe is an economic disaster area thanks to severe shortages of just about everything compounded by Russia's war in Ukraine. Add to this are the highly justified fears that Russia might cut off oil and gas exports to Europe and you have something resembling a controlled state of panic over there. There is serious discussion of gas and fuel rationing for the first time since the aftermath of World War II.
Further is the slow reaction of foreign central banks to combat inflation which is worse in much of the rest of the world. Thus far it looks like in Europe the decision has been made that inflation is the lesser of evils and will need to be tolerated until the Ukrainian situation calms down and some normalcy returns to the broader economy. And it is even more pronounced in some less developed economies where inflation is so severe that it is threatening the stability of the country. Think Turkey, Argentina (a country with defaulting on their debt rivaling soccer for the national pastime) and Venezuela which, thanks to decades of socialism, was an economic basket case long before the pandemic.
All of this is making the US dollar highly attractive. A lot of foreign money is pouring into US securities which is driving down bond yields, despite the high inflation, and shoring up stock prices. In short, the dollar is looking like the safest house in a crappy neighborhood right now.
So, is there any upside to all of this for the average American? Not a lot, unless you are planning a trip abroad. In which case you will find your dollar delivering the best return in recent memory with all major currencies at multi-decade lows relative to the USD. If this continues it could prove injurious to the American economy as our goods and services will become more expensive to export and foreign goods and services will become cheaper.