This year, the U.S. dollar played a significant role in the financial markets (Paulsen’s Perspective, December 10, 2021), and its movement in 2022 will likely prove equally important.

Forecasting the dollar is extremely difficult, and many would say it is a fool’s game. My personal experience predicting the greenback has not been particularly good, but a “fool” is rarely discouraged from trying again. Traditionally, U.S.-dollar outlooks are based on relative economic-growth rates (i.e., expected real U.S.-GDP growth compared to overseas), anticipated inflation rates, a comparison of relative monetary policies, and excess long-term yield spreads.