Putting the Higher Dollar in Perspective

Putting the U.S. Dollar’s current uptrend in perspective

Bullion.Directory precious metals analysis 23 January, 2015
By Terry Kinder
Investor, Technical Analyst

The current move higher of the dollar has certainly created a lot of buzz and consternation, but how does it compare to some previous moves. Let’s take a look.

2013-2014

A lot of digital ink has been spilled over the recent move higher in the U.S. Dollar. So far, the dollar has moved from $78.90 in May of 2014 to $94.82 as this is being written. That’s a move of $15.92 or an over 20% move higher. That move is nothing to sneeze at, but how does that compare to some past moves?

We look back at how the recent move higher in the U.S. Dollar Compares to past moves. Image: pixabay

2009-1010

From 2009-2010 the dollar moved from $74.17 to $88.70 on the U.S. Dollar Index (DXY). That move equates to a $14.53 move or 19.59%.

2008-2009

During the dawn of Great Financial Crisis, the dollar moved higher by $18.93 between 2008 and 2009. The buck went as low as $70.69 and as high as $89.62. Overall the dollar went up a bit over 26.77%.

That’s an impressive move, but by no means the most impressive one. Two moves, one from 1995-2001 and the other from 1978-1985 put the 2008-2009 move to shame.

1995-2001

First, between 1995 and 2001 the dollar went from $80.15 to $121.02, a move of $40.87 or almost 51%

1978-1985

Finally, from 1978-1985 the dollar moved from $82.07 in 1978 all the way to $164.72. That’s a gigantic move of $82.65 or 100.7%.

So, while the current move higher in the U.S. Dollar is impressive, it is only the third highest move (so far) between 1978 and today.

With continued economic stress, especially in Europe, it’s likely that a good deal of money will flow into the dollar and dollar denominated assets which will probably drive the DXY even higher, potentially over the course of several years.

A note on the composition of the U.S. Dollar Index (DXY)

Currently the DXY is a weighted geometric mean of a basket of currencies, as follows:

Before the euro, the European currencies were represented as follows:

The recent climb higher of the dollar is impressive, but not the most impressive since 1978. However, the dollar is probably not finished moving higher yet.

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