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Winter 1997 - Volume 2, No. 3

Tennessee Trade Weighted Dollar Index

The December Tennessee Trade Weighted Dollar Index stood at 113.95, a tad higher than August's 113.04. The Index was remarkably steady throughout 1996, moving little since its steep increase in late 1995. Only three of the twenty-two currencies in the Index moved appreciably during the last quarter: the U.K. pound and the Hong Kong dollar significantly strengthened (by 7 and 5 percent respectively), while the Japanese yen fell about 4 percent against the dollar. The slight increase in the Index was due to the steady, if slow, fall of the European currencies against the dollar. Indeed, the pound was the only major European currency which did not decline against the dollar over the last months of this past year. Most observers expect this trend to continue in the near future. For the most part emerging market currencies were little changed, if anything they somewhat counteracted the European decline. 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. If this holds, we should expect the recent pattern of very modest export growth to continue over the next several months.

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