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Why did the dollar remain strong throughout the recession

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Question: The US economy slowed down sharply in the latter half of 2000, and the actual recession started early in 2001. Monetary policy eased sharply throughout 2001, and for the first half of the year, fiscal policy did not change very much. Yet the dollar continued to appreciate in the first half of the year. It then fell sharply during the third quarter, but rebounded in the fourth quarter and returned to its highs in February 2002. It then fell 12% during the next five quarters. Why did the dollar remain strong throughout the recession, and why did it then decline sharply in 2002 even though fiscal policy became more expansive?

Reference no: EM131737616

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