Will the Dollar’s Surge End in Whiplash?

Some earlier big run-ups in the US currency’s value, including in the mid-1980s and the early 2000s, were eventually followed by sharp declines. But the only thing that can be said with certainty is that the period of extraordinarily quiescent major-currency exchange rates, beginning back in 2014, is now history.

CAMBRIDGE – The US dollar has been on a tear this summer. The Japanese yen and the euro have fallen to their lowest levels against the greenback in two decades; the euro, long worth more than one dollar, is now hovering close to parity. The US Federal Reserve’s broad trade-weighted dollar index has almost re-attained the peak it reached in March 2020 amid the panic triggered by the start of the COVID-19 pandemic. In fact, if one adjusts for inflation in the United States and its trading partners, it is already higher.

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