Currency Update for Steel Trading Nations August 2014

Explanation of Data Sources: The broad index is published by the Federal Reserve on both a daily and monthly basis. It is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. The index weights, which change over time, are derived from U.S. export shares and from U.S. and foreign import shares. The data are noon buying rates in New York for cable transfers payable in the listed currencies. At SMU we use the historical exchange rates published in the Oanda Forex trading platform to track the currency value of the US $ against that of sixteen steel trading nations. Oanda operates within the guidelines of six major regulatory authorities around the world and provides access to over 70 currency pairs. Approximately $4 trillion US $ are traded every day on foreign exchange markets.

Figure 1 plots the Broad Index (BI) value of the US $ since 1995. This can be described in a number of different ways depending on what message the writer wants to send, all of which are true and some of which are contradictory. The BI is well below its peak in spring 2002. Other than the safe haven effect of late 2008-early 2009 the dollar has been fluctuating within a range since mid-2007. The BI has been strengthening since mid-2011. The BI has been fluctuating within a range since mid-2012. The BI strengthened throughout 2013. The BI has weakened in 2014.