Years ago, high U.S. inflation meant a weak dollar. So far, it is different this time, and many on Wall Street are betting it will stay that way.
The dollar is reaching multidecade highs against its trading partners, even with U.S. inflation at its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is reaching highs unseen since 2002. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.
That is a different story than the one that played out in the inflation-plagued 1970s. The dollar plunged nearly 40% against West Germany’s mark, then one of Europe’s most influential currencies, between January 1974 and 1980, according to Federal Reserve Bank of St. Louis data. Federal Reserve Chairman Paul Volcker in 1979 began sharply raising interest rates, fueling a strong…
