Disappearing, Falling ... What Next?

After the recent performance of the U.S Dollar against other free-floating currencies, get ready for more snappy artwork and a different adjective for the cover of an upcoming issue of The Economist. The last couple times these levels were seen on the U.S. Dollar Index, this is what appeared.


In December of 2004 it came oh-so-close to the psychologically important 80 level before bouncing upward and staying aloft for more than two years but, since about one year ago, it has been a series of sharp declines followed by tentative rebounds.


Since the U.S. Dollar Index is primarily the Euro, the chart below is very much the inverse of the chart above - getting oh-so-close to the $1.35 level.


After the 57% contribution from the Euro, the Japanese Yen contributes 14 percent to the index. If not for the world's most political currency, the 80 level would likely already have been reached.


Didn't the British Pound already hit $2 a while back? It contributes 12 percent. Don't be surprised to see this currency follow the path of the dollar before long - the two economies are alike in many ways and their currencies will probably share similar fates.


The Loonie peaked last year at US$0.91 but may be headed back in that direction promptly. It wasn't that long ago that it was closer to 60 cents. Having traveled through Alberta and BC twice in the last few years, the buck bought noticeably less on the second trip (noticeably less gasoline in particular).


The darling of the ball in recent months has been the Australian Dollar, having made new highs almost every day for the last month and catching up quickly to the Canadian Dollar over the last year.

It's not clear what will happen when the 80 level on the Dollar Index, but unless something turns around here in the U.S., it looks like we'll find out soon enough.