We tell our students not to read too much into the strength or weakness of a currency. However, the dollar’s trajectory since November 2016 is quite striking.
Here is the trade weighted real value of the US dollar against a broad basket of currencies, through December 2017.
It is interesting that as of December the dollar is now 2.6% weaker (log terms) than it was in October 2016; it was
6.5% 6.6% weaker than the peak in January 2017 December 2016.
This occurs against a backdrop of an expansionary fiscal policy, suggesting (1) the tax bill is not particularly stimulative, and (2) further stimulus by way of for instance an infrastructure bill has been discounted.
A weakening dollar will be helpful for keeping the trade deficit from expanding further than it otherwise would’ve. (So the question the President asked General Flynn during his short-lived stint as national security adviser was a good one!)