Number: RL33448
Title: Why the Dollar Rose in 2005 and the Prospect for 2006: Insights into the State of International Asset Markets and the Global Economy
Authors: Craig K. Elwell, Government and Finance Division 
Abstract: The path of the dollar is symptomatic of underlying economic forces that shape and propel U.S. international transactions. Of singular importance in this regard is the waxing and waning of the world's appetite for dollar denominated assets and the associated flow of funds on international capital markets. A closer look at the several forces that influence that appetite is revealing of, not only the ups and downs of the dollar, but also the forces behind the large current account imbalances in the world economy (deficits in the United States and surpluses in other major economies), large asset market imbalances in the world economy (a large stock of liabilities in the United States and a large stock of dollar assets in the investment portfolios of foreigners), and the prospects for an orderly or disorderly correction of those imbalances.
Pages: 16
Date: May 30, 2006