The dollar's renewed decline in recent months has increased concerns about how far and how fast the adjustment will go. While the International Monetary Fund has warned for some time of the dangers posed by global current account imbalances, it is important not to be alarmist.

The dollar has depreciated significantly since early 2002 and is now much closer to equilibrium than then. However, it is quite far from its all-time lows. It traded significantly lower in the mid-1990s against the group of currencies that formed the euro. And in real terms the dollar is still well above the levels it reached against the yen just a few years ago, let alone in the early 1990s.