It is important to put this in context though: even after a striking 30% rise against the US dollar, that exchange rate is still only now around its average level for the last 10 years. On a trade-weighted basis, the exchange rate is now only a few per cent above its long-term average.
As I noted earlier, changes in investors’ attitudes and expectations tend to be the main prompts for substantial exchange rate moves. How did those attitudes change last year? For investors, the US “miracle” has turned sour. Share prices have fallen for three consecutive years, and even US interest rates are unattractively low by international standards.