Chart of the Week: Putting the Rise of the Dollar in Perspective

Since its low in 2011, the US dollar is up 31%, and in the past eight months has risen at a pace faster than we have seen in forty years. The rapid rise continues to be one of the greatest concerns to the health of the world economy, some even dubbing it the cause of the next global financial crisis. However, as this chart shows, these kinds of cycles in the currency market are not uncommon. Pain will be felt in corporate profits, as international sales are lower when converted back to a strengthening dollar, but this will not have a large impact on the overall economy in the long run. As the US continues gaining strength in its recovery and international countries continue to lag behind, the increase in the dollar is a normal economic process. The rapidity of the rise is alarming, however, as growth improves in Europe and emerging markets the pace should moderate. For now, it is best to view it as more of a tailwind for international countries than a headwind for the US economy. A rising tide lifts all boats.