Research

Strong dollar risk

The real trade-weighted value of the U.S. dollar has been on a tear in recent months, rising 10% over the year through January to its highest level since 2003 (see Chart 1). Paradoxically, while this is being driven by a stronger U.S. economy, it is also likely hurting some parts of the economy. Given that there is little reason to expect the dollar’s run to end soon, it is important to understand which parts of the economy are being hurt and which are not. To understand this, sensitivity to the dollar is computed for industries and for metro areas using detailed employment data. Exploring the variation of sensitivity by industry and geography can illustrate why some metro areas and industries may be hurt while others are helped by a strong dollar.