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Forty years of hurt
The dollar falls to its lowest value yet
THE dollar’s recent decline has taken it to new lows. The chart shows the nominal exchange rate, in trade-weighted terms (ie, against the country’s trading partners). The index is now 30% below its level when the Bretton Woods system was abandoned in the early 1970s and the dollar has halved since 1985, when leading nations adopted the Plaza Accord to drive it lower. There was a rally in 2008 when the dollar attracted “safe haven” flows during the financial crisis, but that now looks like a blip in a 40-year decline. A weak currency should be good news for a country’s exporters, but that hasn’t stopped America from running a persistent trade deficit. And America’s creditors are having to cope with the unappealing combination of holding low-yielding Treasury bonds in a depreciating currency.
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