Following recent discussion here on surprising dollar strength this year, I would like to add a factor that wasn’t mentioned. Writing some 18 months ago a story about Donald Trump’s possible policies (I am a journalist), I mentioned that his idea to bring US corporate profits back home could lead to dollar appreciation. Because we had similar example not long ago. George W. Bush’s American Jobs Creation Act of 2004 allowed companies to bring foreign profits to US while paying significantly lower tax. He hoped that they would invest these funds at home but they mostly bought back their shares, paid dividends and did mergers and acquisition (they seem to do the same now). 

So, in 2005 US companies repatriated approximately $300 billion. This resulted in almost 13% growth of dollar vs euro as well as of Dollar Index that year. As you can see on the chart, this was the most significant correction during overall dollar long-term bear trend of 2001-2008. 

While obviously there are other factors in play that determine currencies’ dynamics, the factor of repatriation of profits seems to prevail and possibly will continue to play a significant role till the end of the year.