DTWEXBGS: Long-Term Strong and Weak Dollar Cycles 1973-2026

DTWEXBGS, reconstructed through pre-2019 Fed series, has cycled through seven distinct phases since 1973. Volcker, Plaza Accord, Clinton, GFC, Powell 2022: the temporal taxonomy structures any comparative reading.

This piece maps the seven cycles. It says nothing about their consequences — for the empirical audit of associated crises, Eco3min publishes a separate dataset study.

Since the collapse of Bretton Woods in March 1973, the broad dollar has traced a wide historical band. Trough around ~80 (post-Plaza 1995, post-GFC 2011), absolute peak at ~129 (September 2022). DTWEXBGS in its official form dates to January 2019, but earlier Fed series (DTWEXB notably) allow reconstruction of the 1973-2018 trajectory with acceptable methodological homogeneity. To situate this chronology in its analytical frame, see DTWEXBGS as an analytical instrument and more broadly the perspective of the dollar and global monetary architecture.

1973-1985 — end of Bretton Woods and Volcker peak

The first phase spans the decade following the end of fixed-exchange-rate regimes. The mechanics of this regime are detailed in the anatomy of the dollar shortage regime. Between 1973 and 1979, the reconstructed broad dollar oscillates around ~95-100, in a still-disorganized floating regime. The dual oil crisis (1973-1974, then 1979) and double-digit U.S. inflation weigh on the currency.

The pivot comes in August 1979 with Paul Volcker’s appointment as Fed Chair. According to FRED data (Federal Funds Rate, DFF series), the Fed Funds rate is raised from 11% in August 1979 to a peak of 20% in June 1981. The real-rate differential becomes massive. The broad dollar gains more than 35% between 1980 and March 1985, peaking at a reconstructed equivalent of approximately ~127. The Volcker peak remains the fastest documented rise on the broad index — comparable in intensity only to the Powell 2021-2022 cycle. The taxonomy of crises associated with these phases is documented in the historical audit of crises tied to broad-dollar strength.

1985-1995 — Plaza Accord and managed weakness

On September 22, 1985, the G5 finance ministers and central bank governors — United States, Japan, Germany, France, United Kingdom — signed at the Plaza Hotel in New York a coordinated agreement to weaken the dollar. The intervention is massive: between September 1985 and end-1986, G5 central banks collectively sold tens of billions of dollars on FX markets. The broad dollar falls from ~127 to ~95 in eighteen months — cumulative depreciation of approximately -25%.

The weakness phase then extends to the mid-1990s. Intermediate peaks remain contained. The trough is reached in April 1995 at a reconstructed level around ~80 — the lowest value ever touched by the broad index. This decade of weakness coincides with European convergence preparing for the euro, the industrial rise of Japan, and China’s gradual emergence in global trade. The transmission of these cycles to emerging economies is documented in the transmission of dollar cycles to emerging markets.

1995-2011 — Clinton cycle followed by Bush-GFC weakening

From 1995 to 2002, the broad dollar rises continuously. The Clinton-Greenspan cycle combines several factors: federal budget surplus 1998-2001, accelerated productivity carried by the first Internet wave, U.S. growth differential against a deflationary Japan. The broad dollar moves from ~80 in April 1995 to a peak of ~111 in February 2002 — cumulative appreciation of approximately +39% over seven years. The 1997 Asian crisis and the 1998 Russian crisis accelerate safe-haven flows toward the dollar. Eco3min’s map of historical market crises gathers these episodes.

The reversal occurs in 2002 with the dot-com bust and the dual Bush presidency, which accumulates fiscal deficit and the cost of military commitments in Iraq. The broad dollar drops from ~111 in 2002 to ~88 by July 2008. The 2008-2009 Great Recession produces a counter-cyclical safe-haven rebound typical of refuge assets: reconstructed DTWEXBGS briefly rises to ~104 in March 2009 before falling back to ~85 in May 2011 — its second historical trough. The Fed’s quantitative easing programs (QE1, QE2) weigh on the currency.

2011-2022 — long Powell cycle to the absolute peak

The fourth phase is the longest documented on the broad index: eleven years of continuous rise, punctuated by plateaus but without major reversal. The starting point is the May 2011 trough at ~85. The first rising sub-phase (2011-2014) accompanies the May 2013 taper tantrum, which marks the return of U.S. monetary normalization expectations. Reconstructed DTWEXBGS rises to ~100 by end-2014.

Between 2014 and 2019, the index plateaus between ~108 and ~115 in a Fed/ECB divergence configuration. The Trump presidency and the 2018-2019 tariff policies maintain pressure. COVID triggers a temporary plunge in March 2020 (~115 → ~110) before a sharp rebound tied to dollar safe-haven flows. But it is the Fed 2022 hiking cycle that pushes the index to its absolute peak: +425 basis points between March and December 2022, and a DTWEXBGS reaching ~129 in September 2022 — a level never touched in the reconstructed series since 1973.

2022-2026 — the persistent plateau

The current cycle constitutes an observable anomaly. DTWEXBGS has retreated from ~129 (September 2022 peak) to ~119-122 in May 2026 — compression of approximately -6% over forty-four months. According to FRED data (Federal Funds Rate, DFF series), the Federal Reserve has cumulated -100 basis points of cuts since September 2024. Classical interest-rate parity predicted faster depreciation.

The plateau sets in at a historically very elevated level. Twenty-eight consecutive months above 118 — a persistence not seen since the Volcker phase. Three competing hypotheses feed the analytical reading of the paradox, without any having received exclusive empirical validation. The distinctive features of the 2024-2026 cycle deserve separate treatment detailing each of the three hypotheses.

Transversal reading of the seven cycles

Four transversal observations emerge from the reconstructed chronology. First, DTWEXBGS peaks and troughs are not synchronous with those of the DXY: the emerging-market window built into the broad index introduces phase lags. Second, strong-dollar phases tend to last longer than weak-dollar phases — seven to eleven years for upswings, three to six years for the post-Plaza and post-GFC declines. Third, broad-dollar pivots coincide more often with U.S. monetary-policy ruptures than with external shocks. Fourth, the current peak at ~129 and the plateau above 118 for twenty-eight months constitute a configuration without modern equivalent.

For a complementary reading of asset-class behavior across the broad-dollar phases, see the analysis of the worst broad-dollar first-halves since 1973. None of the seven phases has produced identical financial-asset behavior — temporal taxonomy remains a starting point, not a universal grid.

Last updated — 31 May 2026