However, it looks like the dollar just needed a breather after recently completing the largest 3-month annualized gain since December 2008. The dollar also has the benefit of a 10-year government debt market that is currently yielding between 89 bps and 171 bps more than other major bond markets in the world. Finally, on a CPI-differential purchasing power basis, the USD has moved to it's strongest (albeit still net-weak) position relatively to 18 other currencies since 2010. As the last chart shows, trends in PPP tend to play out over years so a reversal would be surprising but not completely unprecedented. If the dollar does continue to advance, we would most likely expect revisions to make another downleg as well.
