The dollar has gained amid relatively robust U.S. economic growth vis-a-vis the rest of the world. The nation’s currency has been helped by the likelihood of higher U.S. interest rates even as many central banks around the globe ease monetary policy. These combined forces have pushed the dollar up about 15 percent from a July 2011 low (Chart 1).
Like the sharp drop in oil prices we wrote about last month, the significant appreciation of the dollar is likely to have wide-ranging implications for U.S. economic growth, the inflation outlook, and investing opportunities.