"Broad Dollar Index"
The weak dollar is a byproduct of the sluggish economy, Federal Reserve policy targeting ultra low interest rates, and unsustainable deficits. Some analysts view the weak dollar as a sign of impending inflation. While inflation remains low in the U.S., it is a problem in China, which pegs its currency to the dollar, and in other emerging markets that are attracting strong capital inflows -- "hot money" looking for higher yields than are available in the U.S. In particular, prices for food, energy and commodities are being forced upward. The weak dollar has boosted exports by making domestically manufactured products cost less overseas. It has done so without much collateral damage in the U.S., at least in the short run, because the sluggish economy will provide some cushion from inflation until stronger growth kicks in. Policy makers hope that a gradual economic recovery will provide time for the Federal Reserve to reverse its quantitative easing programs and time for legislators to enact spending cuts that will bring long-term deficits under control -- strategies that would strengthen the dollar and keep inflation from overheating. The current situation is mostly positive for commercial real estate. The weak dollar makes U.S. properties cheaper for overseas investors, while inflation fears make commercial real estate, which is viewed as an inflation hedge, look relatively attractive.
Source: Federal Reserve, Grubb & Ellis