NEW YORK (TheStreet) -- If you worry that the resurgent dollar will lose its strength in the wake of the Federal Reserve's decision last week to leave interest rates alone, you shouldn't.
There is still a divergence in central bank policy around the world that will favor a continued rise in the value of the greenback, even if Fed Chair Janet Yellen and her colleagues continue to muddle around. Let's look back at some recent history of the U.S. currency and its rivals to understand what's happening.Back in March 2014, the euro was worth $1.39. This is when the European Central Bank began to loosen up its monetary policy and indicated that it wanted the value of the euro to decline against the dollar and other major currencies.
At that time, the Federal Reserve in the United States had announced and confirmed through actions that it was in the process of tapering its quantitative easing program, which the Fed ended in October.
In late fall 2014, the European Central Bank began talking up its own version of quantitative easing, which it indicated that it would start early in 2015. Japan and other major nations also were engaged in quantitative easing or monetary policies that were quite loose.
Hence, the divergence in monetary policies. All else being equal, a looser monetary policy -- which typically includes lower interest rates -- makes a currency weaker against its rivals than a tighter monetary policy.