Exchange rates often move widely in relatively short periods of time. For example, the dollar's value against six major currencies reached a 20-year high in May 2022 – largely due to the Russian invasion of Ukraine. In the winter of 2022, it took as much as $1.15 to buy a euro, but by the following autumn the cost of a euro fell to as low as $0.96.
Why do exchange rates, which translate prices from one currency to another, swing so widely? And why and how do shifts in dollar exchange rates matter? In this episode of EconoFact Explains, we look at the causes of movements in exchange rates, the consequences of a strong dollar domestically and internationally, and whether or not U.S. policy should be geared towards targeting the dollar's value.