If the Aussie does not do now wrong moves, it seems that poor old dollar does not believe. The last ten months, investors found reasons to sell the dollar regardless of the news. If the economy looks weak, then sell the dollar because it means that the Fed will stay the course. If the economy is better than steel, while the dollar selling due to growing demand for risk, which is an emerging market assets. If the U.S. corporate profits afloat, then the growth of offshore assets look more attractive. If Washington is not doing enough to fiscal policy, then sell the dollar because of the fact that foreign lenders lose confidence in politicians. If Washington decides to budget problems, then sell the dollar because it means that the Fed will keep monetary policy loose. No matter what happens, (that's quite some time), the popular response to traders and investors - to sell the dollar.Nevertheless, there are three forces that are applying pressure on the dollar at the moment. First - desperation with which the sovereign funds and leading central banks in Asia and the Middle East seeking to reduce their dollar assets. As a result, the leading liquid currency, the euro and the pound strengthened against the dollar, despite the dubious basis for this. Secondly, despite the growing confidence that the recovery has become more stable, the weakness of the labor market increases the likelihood that the Fed will hold interest rates low for a considerable time. In turn, this assures that the dollar became the leading candidate for the currency for the Carry-trades. Thirdly, the fact that Washington might finally do the U.S. budget obesity increases the likelihood that the Fed will stick to loose monetary policy for a long time.
For a long time, the dollar price action was the same, namely to sell it for any situation. In the short term, it is difficult to imagine what could break this trend, which is rooted in the currency markets. The only circumstance that could give the dollar a delay is good old-fashioned aversion to risk. If you look at price activity this week, it becomes clear that this is unlikely in the near future.
Translate this page
