Although it easily is overlooked, the value of a nation’s currency can exert wide-ranging economic influence.
After reaching a high late last March when the dollar was being used as a safe haven, the U.S. Dollar went into a steep slide through January 6 this year, as traders became increasingly comfortable that an economic revival was on a distant horizon.
In contrast to the normally tame trading in the dollar, the more than 14% drawdown from high to low in this period was significant.
The weakening dollar raised prices for imported goods, but at the same time, U.S. exports became more competitive in global markets, which can be extremely consequential as more than 40% of revenues for U.S. companies come from overseas. The falling dollar also helped emerging markets that need U.S. dollar reserves.