Dollar Highs and Lows in 2010, 2009, and 2008

January 4, 2011

Over the first nine years of the euro’s existence (1999-2007), the U.S. dollar had a mean value of 1.1199 per euro, 1.6899 per pound sterling, 0.6701 per Australian dollar, 115.16 Japanese yen, 1.4139 Swiss francs, and 1.3570 Canadian dollars.  Note that the euro, sterling and Aussie dollar are conventionally quoted in direct terms, that is U.S. currency per unit of foreign currency, while the others are expressed in indirect terms (units of foreign currency per dollar.)

The dollar’s calendar year highs and lows in 2008, 2009, and 2010 are indicated in the table belowOnly the Canadian dollar fluctuated in a high/low range of less than 10% last year, but six of the seven currency pairs — Swiss-dollar being the exception — traded in a narrower range in 2010 than in 2009.  Dollar lows for 2010 against the Swiss franc, Australian dollar, and Canadian dollar were set in the final week of the year.

  Dollar Highs Dollar Lows
  2010 2009 2008 2010 2009 2008
EUR 1.1878 1.2458 1.2331 1.4582 1.5144 1.6038
GBP 1.4232 1.3505 1.4385 1.6457 1.7043 2.0397
AUD 0.8068 0.6250 0.6009 1.0253 0.9405 0.9848
NZD 0.6563 0.4896 0.5195 0.7979 0.7635 0.8213
JPY 94.98 101.44 112.05 80.25 84.83 87.15
CHF 1.1730 1.1967 1.2298 0.9300 0.9919 0.9637
CAD 1.0851 1.3064 1.3017 0.9926 1.0207 0.9713


Against the euro, the dollar experienced a stronger high and a stronger low in in 2010 than in either 2009 or 2008.  The opposite pattern was true in the cases of the three commodity-sensitive currencies shown and, more importantly, dollar/yen and cable (jargon for the dollar versus sterling). Sterling is the only currency from the above group that is presently trading at a stronger dollar value than its 1999-2007 average.  Because the dollar has fallen on balance during the era of flexible exchange rates, the burden of proof in forecasting the U.S. currency for any lengthy period of time ought to fall on making the case for why the will appreciate rather decline.  Those instances of multi-year dollar strength have coincided with special circumstances such as the eradication of high U.S. inflation in the early 1980s via very elevated real interest rates, or the explosive growth of U.S. productivity during the late 1990s, or the present period when investors have acted on pessimism about the euro’s long-term viability.

Successfully trading the dollar is barely helped by the knowledge that it tends to depreciate in the long run.  Short-term volatility in the dollar usually swamps underlying long-term net movement.  This property can be seen in the wide high-low spreads each calendar year compared to the sequential changes in highs or lows.  Big runs like the three years to end-1987 do not happen often.  Back then, the dollar fell from DEM 3.156 and JPY 251.25 at end-1984 to DEM 2.452 and JPY 199.25 at end-1985, DEM 1.936 and JPY 159.85 at end-1986 and DEM 1.576 and JPY 121.4 at end-1987 at which point the mark and yen were trading 100.3% and 107.0% above their values just three years earlier.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.