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Don't fear a rising dollar

The widely assumed correlation between monetary policy and currency values does not stand up to empirical examination.

Monetary policy is not the only determinant of exchange rates. Trade deficits and surpluses also matter, as do stockmarket and property valuations, corporate profits, and economic growth and inflation.


THE US Federal Reserve is almost certain to start raising interest rates when the policy-setting Federal Open Markets Committee next meets, on Dec 16. How worried should businesses, investors, and policymakers around the world be about the end of near-zero interest rates and the