At the same time, the close to 20% rise in the trade-weighted dollar
will mean higher imports from abroad," Alexander said.
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.
Macroeconomic Advisers' October baseline forecast assumed that the trade-weighted dollar
would rise from an average of 102.
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.
The broad trade-weighted dollar
is down 20 percent from its peak early in the decade.
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.
economic activity has drawn renewed interest lately following the large declines in the trade-weighted dollar