This is the time of year when markets collectively start winding down one calendar year and looking forward to the next. We will be talking about our thoughts for 2019 in the next couple of weeks, but for this week, let's review one of the most overlooked financial indicators of the year — the U.S. dollar.

The U.S. and global financial markets focused their attention on other areas throughout the year. Equity volatility, which has been led by the U.S., has reverberated around the world as we have seen ups and downs of 4 to 6 percent the last couple of months.

Oil prices have been on a sharp downturn, falling by more than 30 percent before recovering about 6 percent of that fall in the last couple of weeks.

Finally, the inversion of some parts of the yield curve has generated a ton of chatter about recession; as that has been a harbinger of recessions in the past. As to the chances of recession, watch Paul Single's latest Economic Perspectives.

The U.S. dollar has been tame in comparison. The trade-weighted index of the U.S. dollar has not varied more than 4 to 6 percent throughout the entire year.

As we stand at the beginning of December, the dollar is at its strongest for the year within those tight ranges. Glancing at the dollar against other currencies for the year, the dollar is stronger by just under 6 percent against the euro and British pound and just over 6 percent against the Canadian dollar. The Japanese yen is actually within half a percent of where it started the year.

What may be more interesting is to look back over the last three years. Believe it or not, the U.S. dollar is actually not too far from the place it was at when the U.S. Federal Reserve started raising rates back in December 2015. That was eight, 25-basis-point rate increases ago, with a ninth hike expected later this month. We did have some decent volatility last year as the dollar rallied after the 2016 presidential election.


Our View: The main point here is that markets were not sure where to take the dollar this year as financial risks and rewards were reflected in other markets. We will be talking next week about our thoughts for next year.

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