links for 2010-11-15

This chart is arguably the best measure of the dollar's value relative to other currencies. It compares the dollar to a large basket of trade-weighted currencies, and it is adjusted for relative inflation differentials. This eliminates the distortions which come from, for example, a large nominal rise in the dollar against a currency that is suffering from very high inflation: if the dollar's rise offsets the effects of that currency's inflation, then the dollar has not really risen at all. Similarly, it corrects for large depreciations of the dollar relative to currencies (in particular the yen) that have enjoyed lower rates of inflation than the U.S. The latest data from the Fed show that the dollar has once again—for the fourth time since the early 1970s—hit bottom.