Wednesday, May 4, 2011

Forty Years of Dollar Decline

The dollar just hit further new lows. As the Economist chart shows and they point out, the nominal exchange rate, in trade-weighted terms (ie, against the country’s trading partners) 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 the Plaza Accord was adopted. 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.

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