I don’t think this is a mystery. When the world economy is strong and fear is low, the dollar will drop when the fed is cutting rates or increasing the money/credit supply. That is why the dollar fell over 35% against the Euro from 2001. However, when there is fear in the world markets and people are worried about financial stability the dollar isn’t going to get punished. It is still the reserve currency and most debts are paid for in dollars as well as commodities (oil) around the world. If the dollar wasn’t the reserve currency it would be getting crushed, but since it still is, in times of fear and uncertainty, people will run to it. I’m not a currency expert but have tried to understand why and if the dollar would hold up in a world recession type scenario and this is what I believe.
