Question
Since the beginning of the year, the US central bank has lowered its key lending rate from 1.5% to 0%. In addition, the US government
Since the beginning of the year, the US central bank has lowered its key lending rate from 1.5% to 0%. In addition, the US government has injected nearly $3T in capital (14% of 2019s GDP) into the US market through targeted loan programs, grants, and taxpayer-targeted stimulus payments. These fiscal policies have been more aggressive than what many governments have done around the world. Based on our studies, we would expect these actions, absent other factors, would weaken the US dollar relative to most foreign currencies, but the US Dollar Index shows the dollar has strengthened by nearly 4% since January 1st. What other factors may have contributed to the USD strengthening in this way? Strictly for your reference, I have included a table disclosing the types and weight of currencies used in the US Dollar Index (no math required!).
Euro | 57.6% |
Japanese yen | 13.6% |
Pound sterling | 11.9% |
Canadian dollar | 9.1% |
Swedish krona | 4.2% |
Swiss franc | 3.6% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started