The dollar had a good day today, rising roughly 1%. Some are beginning to wonder if the greenback has hit bottom and is ready to rebound.
Consider this: the dollar is off about 26% from its peak in February 2002. So, as this chart from Win Thin, Senior Currency Strategist at Brown Brothers Harriman & Co, shows the dollar has had a long fall.
And after a long fall, there is usually a long climb back. The implications of such a swing are important. Oil prices, which are set in dollars, would likely come down some. Relief at the pump means less pressure on Congress to pass policy changes -- gas tax relief, windfall profits tax on oil companies, etc.
A shift in the dollar also reduces pressure on import inflation, easing the Fed's job.
On the downside, exports might fall as US products become more expensive.
On the whole, a moderate rise in the dollar would be a welcome development. But it will take more than a one-day rally to be sure the greenback's worst days are behind us.
