As the dollar hits 20-year highs against a wide number of key foreign currencies, the historic specter of foreign exchange market crises looms large. While now largely forgotten by all but those of us who covered the event, a surging U.S. dollar in 1985, entering the way-back machine now, forced the then G-5 industrialized nations to intervene in currency market and weaken the dollar substantially. Similarly, in late 1994, 1997 and 1998, a surging dollar caused a great deal of upset not only in foreign exchange markets but also in the global economy, as well. Once the link was broken, Mexico faced massive inflationary risks, as the peso plunged against the dollar. The U.S. actually lent Mexico $50 billion, in cash, to right its economic ship, as inflation surged to 52% south of the border.

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