Trade and trade deficits also matter. The U.S. current-account deficit has begun to widen again, reaching $471 billion in 2017, or 2.4 percent of gross domestic product. Japan's external surplus last year was 3.9 percent of GDP and the euro zone's was 3.4 percent of GDP. Those imbalances create an excess supply of dollars relative to yen or euros. 

In addition, the Trump administration's willingness to thrice announce tariffs this year may have created the impression among investors that the US government favors a weak dollar as a means to boost competitiveness and create jobs. 

So what conclusions are we supposed to draw? Whether or not the dollar's recent bounce becomes a trend is anyone's guess. True, that is unhelpful. But the reality is that exchange rates are intrinsically more difficult to forecast than most other economic or market variables because they are driven by a myriad of factors that can't be simplified into a simple rule of thumb. 

Comments: Be the first to add a comment

add a comment | go to forum thread