Two main forces underlie the large U.S. current account deficits of the past decade. The first is an increase in U.S. demand for foreign goods, partly due to relatively faster U.S. growth and partly to shifts in demand away from U.S. goods toward foreign goods. The second is an increase in foreign demand for U.S. assets, starting with high foreign private demand for U.S. equities in the second half of the 1990s, and later shifting to foreign private and then central bank demand for U.S. bonds in the 2000s. Both forces have contributed to steadily increasing current account deficits since the mid-1990s, accompanied by a real dollar appreciation until late 2001 and a real depreciation since. The depreciation accelerated in late 2004, raising the issues of whether and how much more is to come and, if so, against which currencies: the euro, the yen, or the Chinese renminbi.