What is happening to the value of the U.S. dollar these days?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Over the past year or so, the United States dollar has been appreciating against most other currencies.  You can see this trend in the graph in this link.  This graph shows that the US dollar has gotten much stronger when compared to a “basket” of currencies over the past year. 

There are a few different reasons why the dollar has been getting stronger.  One of these is discussed in the link below.  There, we are told that the dollar is getting stronger because the Fed has stopped buying so many government securities (this is what “quantitative easing” means).  When the Fed reduces its purchases it means that less money is pumped into the economy.  The money supply stops rising so fast and dollars are somewhat scarcer.  At the same time, other economies’ central banks are doing more quantitative easing, increasing the supply of their currencies.  When the supply of dollars drops and the supply of other currencies rises, we can expect to see an increase in the value of the dollar (all other things being equal).

So, the dollar’s value has been increasing for the past year or so and seems likely to continue to do so for at least a little while longer.

Sources:

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