Indeed, the dollar’s strength seems to know no bounds. It climbed to its highest level in 12 years against currency indexes late last year, then dropped steeply under the threat of a U.S. recession. But since the new year, when Fed chairman Alan Greenspan started cutting interest rates, the dollar has soared to new highs. That defies logicas well as gravity. Low interest rates, now 4.5 percent in the United States versus 4.75 percent in Europe, are supposed to cause money to flow out of a country and weaken its currency. So why isn’t it happening? Even when decelerating, the U.S. economy is the most flexible, fastest growing in the world, promising returns on investments higher than anywhere else. “Look around the world,” says Allan Meltzer, a Treasury consultant and monetary expert at Carnegie Mellon University. “The United States has slowed dramatically, but everyplace else still looks like more trouble.” In the land of the blind, the one-eyed man is king.
