An Examination of U.S. Dollar Declines

Roosevelt D. Bowman and Jan Groen

No 20110926, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Although the dollar strengthened somewhat recently, its level relative to the currencies of the United States’ main trading partners is nonetheless 11 percent lower than it was at the start of 2009. This represents one of the more pronounced periods of dollar weakness over the past two decades and consequently has garnered considerable attention from market participants and policymakers alike. In this post, we examine the role of market uncertainty and currency risk premia in the pace and size of episodes of dollar weakness since 1991. We find that the most recent bout of U.S. dollar declines largely can be attributed to the recovery in global economic activity from the most recent recession.

Keywords: implied volatility; currency risk premium; exchange rates (search for similar items in EconPapers)
JEL-codes: F00 G1 (search for similar items in EconPapers)
Date: 2011-09-26
New Economics Papers: this item is included in nep-mon
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