(Bloomberg) -- A measure of the dollar calculated by the Federal Reserve that’s related to how much different currencies are used in international trade has climbed to its highest-ever level.
The central bank’s trade-weighted nominal broad dollar index last week eclipsed the previous high it set back in March 2020, according to data released by the central bank Monday. That means that it has now fully reversed the slide of more than 12% it suffered between the peak of the Covid pandemic crisis in early 2020 and mid 2021.
Fueled by hawkish Federal Reserve policy, US economic strength and investors in search of a haven from market swoons, the greenback is surging relentlessly against counterparts big and small by the most in decades. On Friday, it pushed up to its highest level against the euro in 20 years, and was the strongest against the pound since 1985. Earlier last week, its gains against the yen prompted the Japanese government to step in directly to prop up the currency for the first time since 1998, joining a host of peers that have engaged in intervention.
The trade-weighted nominal gauge reached as high as 127.4232 on Friday last week, above the prior record of 126.1428. The Fed also has a so-called real index tracking the dollar in a trade-weighted fashion that differs from the nominal gauge. Produced on a monthly basis, that measure is hovering close to multi-decade highs, but remains below its mid 1980s peaks.
The Bloomberg dollar index, an entirely separate gauge that measures the greenback against a basket of developed- and emerging-market currencies in data going back to 2005, has already been forging to new highs, while the dollar index produced by ICE -- a measure that includes only developed currencies -- is around its highest mark since 2002.
©2022 Bloomberg L.P.
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