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Dollar Is Wandering Off Track
It is widely believed among economists and currency analysts that currency values follow the relative interest rates. We are told, “Money goes where it is treated best”, and so the currency which offers the best interest rate will attract the most capital. But that does not really explain what has been happening over the past year. The US Federal Reserve has kept short term interest rates near zero, and just about every other central bank around the world has done the same. But the US Dollar Index is up 16% versus January 2014. So clearly the microscopic differences in interest rates do not explain this behavior. ... (full story)