The chart below shows the US dollar index over the past 40 years together with its longer term moving average, as well as one and two standard deviation bands. To some the chart may suggest that exchange rates are mean reverting; some will see a longer-term declining trend in the dollar; others will point to what may be considered an extreme valuation given that the dollar index has been around two standard deviations above its moving average. To us, the fact that the dollar has moved so far from its moving average gives rise to the ... READ MORE
