Monday, January 15, 2018

Dollar languishing at lowest level in three years

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Things have gone from bad to worse for the US dollar. After recording its first annual decline in five years in 2017, an index of the US currency versus America’s largest trading partners has now dropped to its lowest level in three years.

The ICE dollar index, which measures the dollar against a basket of six other currencies, fell nearly 10% in 2017, the biggest annual decline since 2003. At the start of 2018, it was pushed even lower by gains in the euro, which makes up more than 50% of the weight of the dollar index.

The euro climbed to $1.22 in trading today, the highest since late 2014, after a breakthrough in German coalition talks last week looked set to bring about an EU-friendly government led by Chancellor Angela Merkel. Meanwhile, the strength of the euro-zone economy has raised expectations that the European Central Bank will further pare back its monetary stimulus, which normally depreciates a currency.