The buck stops where? US dollar keeps surging against euro, yen and other world currencies

WASHINGTON – The U.S. dollar has been rolling. Since June 30, its value has jumped 16 per cent against a collection of world currencies.

Investors are embracing the dollar because the U.S. economy is strong, especially compared with most other nations.

U.S. economic growth clocked in at a 5 per cent annual rate from July through September, the fastest quarterly pace in more than a decade. During 2014, American employers added nearly 3 million jobs, the most in any year since 1999.

Investors also like the safety of U.S. Treasurys, which pay a higher yield than government bonds in Japan and most big European countries do.

Another lure: The Federal Reserve is expected to raise short-term interest rates this summer or fall, making U.S. rates even more attractive for investors.

But the dollar’s strength also reflects weakness elsewhere:


The dollar is up 16 per cent against the Japanese yen since mid-2014. Japan slid into recession last quarter after the government imposed an ill-timed sales tax increase. The Bank of Japan has tried to revive the economy by buying bonds to lower rates, boost inflation and drive down the value of the yen to aid Japanese exporters.


The dollar has surged 18 per cent against the euro since June 30. Economic growth among the 19 countries that use the euro has flat-lined. Last year, the European Central Bank slashed rates and sought to stimulate lending by promising to buy bundles of bank loans. Next week, the ECB is expected to announce a program to buy bonds — a version of what the Fed did three times since 2008 — to lower long-term rates and stimulate the eurozone economy.


The dollar has gained nearly 20 per cent against the Brazilian real since the middle of last year. The Brazilian economy is beset by a combination of slow growth and high inflation. The Brazilian Central Bank will likely raise rates next week to try to fight inflation and rally the real, economists at Barclays predict.


The dollar has soared a staggering 96 per cent against the Russian ruble since June 30. Plummeting oil prices and economic sanctions have devastated the Russian economy, which is likely headed toward recession. Money is fleeing the country. In mid-December, the Russian central bank raised rates to try to salvage the currency. The move has at least slowed the free-fall.