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Asked a question 13 days ago

Hi Lyn, can you explain the economic fundamentals behind weak/strong dollar effects on inflation/deflation? Does a weak dollar always positively correlate to inflation (lower interest rates)? & vice versa for strong dollar(deflation/higher interest rates)?

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Lyn AldenExchange Expert
Founder of Lyn Alden Investment Strategy

Strong/weak dollar pertains to the dollar vs other currencies. 

Inflation/deflation is about the dollar as it pertains to a basket of goods and services. 

In general, at this stage of the dollar cycle, deflation comes with a stronger dollar, while inflation comes with a weaker dollar, but there are technically ways to get higher inflation and a stronger dollar together (eg inflation in the US but even higher inflation in Europe), although I consider them unlikely here.