Waiting for the Dollar's Next New Low

For the past six years the US dollar has been on a downward path. Ithas made one new low after another, interrupted only by the occasionalrally.

Last September, the US Dollar Index, which compares the dollar'srate of exchange against other major currencies, fell to an all-timerecord low. After a short-lived bounce, it fell to one new record lowafter another for the first three months of this year. The Dollar Indexthen settled within a narrow trading range, which continues to confineit.

More record lows in the Dollar Index can be expected. After all, thedollar closed this month at a new record low against crude oil, and isnear record lows against many commodities. In other words, thepurchasing power of the dollar is being eroded by inflation, repeatingthe experience of the 1970s. The following chart of the CRB ContinuingCommodity Index shows that the uptrend in commodity prices is wellestablished.

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