We have returned to that point in the cycle where the dollar starts moving down and the doomsayers come out of the woodwork. As the headlines have begun to point out the decline of the dollar in recent months, worries have started to rise. In fact, if you look at the chart for the most recent couple of months, you can see where these headlines are coming from.

And Now For Some Context
The thing is, though, the chart above is a cheat. Yes, the numbers are true enough, and the decline over that time period is real. But what is missing is context. To provide this context, below is a chart of the past year.

Yes, the dollar is down from its recent peak. But it is still above the levels we saw through most of 2019 (which, remember, was a good year).

The Real Story
The real story is not the recent decline. Instead, it is the spike in the dollar’s value when the pandemic hit around the globe. Everyone wanted dollars when risks started to rise, which is why the value went up. The recent decline has everything to do with things looking less risky in the rest of the world—and nothing to do with the U.S. looking shaky. If anything, the dollar in 2020 shows just how much of a commanding position it still has.

If we look at the past 10 years, we see the same story. The dollar remains at its highest level over that time, except for the past couple of pandemic months. The dollar has gotten steadily more valuable over that time period as the U.S. economy has continued to outperform most of the rest of the world. In that time, we have seen spikes and reversals before, and this is just the latest round.

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