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Fall 1996 - Volume 2, No. 2

Tennessee Trade Weighted Dollar Index

The August Tennessee Trade Weighted Dollar Index stood at 112.57, just a bit above April's 112.25. In fact, the index has remained virtually flat since the end of last year. Most European currencies strengthened slightly against the dollar over the second quarter, but this was counteracted by equally slight falls in many emerging market currencies. The values of the Canadian dollar, the Japanese Yen, and the Mexican Peso the currencies of the state's three largest trade partners have hardly changed at all. Only two currencies made anything more than minimal moves during the last quarter: the Italian lira gained a little over 3 percent against the dollar, while Korea's Won fell about 4.75 percent. Changes in the value of the Dollar Index have fairly accurately predicted changes in Tennessee's rate of export growth about six months ahead of time. This suggests that state exporters may now be shaking off the effects of the steadily rising Index of the last half of 1995. On the other hand, they may have but a short time to catch their breath: most commentators are anticipating the dollar to rise again in the coming months.

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