I would not be surprised if the dollar were to go back the higher levels of the 90s (and even higher). For purpose of analysis let us imagine dollar prices such as: eur/usd at 0.50 or lower, and usd/jpy at 250 or higher. What would be the implications on the economies of the world? The USA consumer would be able to buy foreign labor and commodities at half the current price. USA persons worth/value would rise because a higher a higher USD, and a higher US stock market could more than double relative to other world stock markets (because of a higher USD value and higher US stock market margins given the conceptual/intellectual economy component). Could a higher USD lead to a collapse of the economies of russia (lower energy prices, and lower currency), china (lower labor prices and a lower currency value) and japan (price depression and older population)? A higher USD could also lead to capital flows to the US, which would make the US economy even better.
AfterLOS axiom #7: HERD catches on to new TREND after its already been in motion for quite a while - but then they do the damndest thing - they cannot help it but have gotta extrapolate the new trend to INFINITY Watch out now, HERDY ..... Dollar has had a good run while Gold=realmoney has been crashing. gold near support while dollar finishing or close to finishing first upwave. Role reversal? Wouldn't surprise me. Fortune prefers the prepared lad - she always has, always will Airplane flies right over HERDY - yet again.
This is not a trading thread, it is economics. As for trading since this thread started, Dollar went up (others down), and Yen got beaten real hard over night. EUR/USD could rally, but it would be a bear market rally to a price where sellers would defeat the buyers.
My first post to this thread was deleted so your answer is out of context. Dollar has not been rallying only since you started this thread - $ has been rallying since May Both Euro and Yen have been getting hit for months. So, why would Euro's upcoming rally be a bear rally and not a bull-run in your opinion?
I think that multinational companies producing goods outside the US cant raise sales prices in depreciating local foreign currency so they lose in the exchange to rising USD. These same foreign countries would 'lose' by purchasing things made in the US and priced locally. US Exporters would have to cut prices to not appear as a price increase to overseas markets. Expect to hear a lot about this for Q4. Read about Plaza Accord in 1985. What level of usd vs euro and yen would cause the fed or our fiscal warriors to adjust? Yellin recently said that these countries should do what they must do to protect their economies . I await Mitt Romney to call out more currency manipulators.