By Isaac Cohen*
The US economy strong performance last year, amidst the slowdown in almost all the other advanced and emerging market economies, is reflected in the strength of the dollar. Against a basket of currencies, since last May, the dollar has increased 19 percent and since July, the dollar has increased 16 percent against the euro and 15 percent against the Japanese yen.
It should be recalled that the US dollar is coming out of a period of relative weakness. For example, in 2007, as a consequence of the Great Recession, the US dollar declined almost 8 percent. By contrast now, as a result of the weakness in the euro zone economies, the euro is approaching parity with the US dollar. After reaching in the past an exchange rate of $1.40, the euro this week is approaching $1.10.
As declared by the young Italian Prime Minister Matteo Renzi, “my dream is parity” between the dollar and the euro. He made the statement in an interview with The Wall Street Journal, at the World Economic Forum in Davos, Switzerland, just one day before the European Central Bank announced a bond purchasing program, to stimulate the euro zone economies, which weakened the euro even more.
Therefore, what we are witnessing is the adjustment of exchange rates, according to the relative strength or weakness, of the advanced economies.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.