Should We Be Concerned About the Speed of the Depreciation?

Over the past 12 months, the dollar has depreciated approximately 30 percent on a trade-weighted average basis against the currencies of our major trading partners.’ This recent depreciation, at a rate of approximately 2.4 percent per month, has been the most rapid since the floating-exchange-rate system began in March 1973. In contrast, between September 1977 and October 1978, a period characterized by a worldwide lack of confidence in U.S. economic policies, the dollar depreciated at a pace of only 1.3 percent per month on a trade-weighted basis.