I think the dollar is strong not because European, Japanese and Mexican officials want a weak currency, though some clearly do,but because of the incentive structure created by actual policy. In particular, the divergence of monetary policy, broadly understood, has arguably been the single-biggest force lifting the US dollar.
There is some anticipation of a more supportive policy mix. Fiscal policy has been neutral to a drag in recent years, but it has been clear since last summer that regardle…