dollar fortunes by Krishna Guha FT

. The dollar's decline has so far been remarkably orderly, with none of the warning indicators that might signal an incipient crisis flashing even an amber alert.

The US currency's decline has slowed in recent months, and implied volatility in key bilateral currency markets is much lower now than it was in the early summer. Risk premiums on a wide range of dollar assets have fallen. There is no evidence of a rise in the cost of borrowing for the US government.

"Panicking over the dollar decline to this point is unwarranted," says Rick Mishkin of Columbia Business School, a former Fed governor. "We haven't seen a big sell-off in long-term Treasuries at the same time. We haven't seen a run-up in inflation expectations."

...

Across town, the Fed is focused on inflation expectations. But officials are paying attention to currency developments and would not be indifferent to a combination of dollar weakness, rising commodity prices and rising inflation expectations.