A boost for exports: At the turn of last year, the Federal Reserve's trade-weighted dollar
index showed that the U.
While the trade-weighted dollar
is below its level at November's election and bond yields have largely flatlined since the start of the year, stock prices have continued to rise - apparently the last part of the Trump trade to have some momentum.
The GSFCI is a weighted-average of four financial variables: (1) short-term interest rates, (2) corporate bond yields, (3) the trade-weighted dollar
and (4) the ratio of equity market capitalization to nominal gross domestic product (GDP).
For our sample excluding the financial crisis (1994-2007), we found that Fed funds surprises had a significant effect on the percent change in the S&P 500 index, but generally had little significant effect on Treasury yields and the trade-weighted dollar
After adjusting for inflation, the real trade-weighted dollar
is up nearly 10 per cent over that same period or eight per cent year on year.
By default, though, we might reasonably take a firmer, trade-weighted dollar
as a base case of expectation.
These calculations are based on the Federal Reserve's Broad Trade-Weighted Dollar
Index, which includes a larger group of currencies than the USDX and is weighted based on foreign trade.
From 20012008, the Federal Reserve trade-weighted dollar
index declined from 130 to 96 without stemming the trade deficit.
Taking a look at the trade-weighted dollar
index, we can see much of the same chart as in EURUSD, AUDUSD or NZDUSD - an anti-dollar trend channel that has come to some measure of resistance.
Over the past six years, the value of the trade-weighted dollar
has fallen by more than a quarter, as the United States has continued to rack up historically unprecedented trade deficits.
current account and movements in the real trade-weighted dollar
suggest that decisions about where to place savings have driven the adjustments.
external imbalance, while simultaneously sustaining healthy global economic growth, is a further depreciation in the real trade-weighted dollar
from its current level--on the order of 15-25 percent.