The US dollar index has held support at 80 for all its existence(more than 20 years), every single time. Why 'this time is different'?
The dollar will be a big winner at some point. Lets face it, the only reason people buy GOLD and other currencies is to some day come back and buy Dollars. Sentiment is against the dollar for some time, but ultimately there will be a flood of money into dollars because in the end everyone wants to come to America and buy with Benjamins. At least I hope. I only have alot of dollars and not much gold.
Don't worry, MTV is keeping us cool overseas and luckily our cultural mish-mash is a prevailing hipness idealized that other cultures and countries like. There will always be people wanting American things and culture unless we turn totally bombastic, religious, go invade countries, and our government tries to dig looking holes into places they don't belong. :eek:
The US dollar is at multi year lows primarily due to the massive liquidity infusion since the dot com implosion. This is now just beginning to reverse. Long term I am a dollar bull. The press likes to harp about the twin deficits, but that really only affects the dollar's value if dollar investors believe that this will lead to default. At this point, no one believes this. The deficit ratio is at 2%, about average. The numbers keep growing, but so does GDP. Recession fears do not affect the dollar much long term cause if the US goes into a serious decline, so does everyone else. Regardless of what the press might have you believe, the USA is still the economic engine of the world. Yanks are the ones out there buying everything. Asia is heavily export dependent, and even Europe is to a lesser extent. Trade deficits don't hurt the dollar in the long run either. Econ 101 says it should (PPP and all that), but export countries have to prop up the $ to keep their economies humming. Sure, they could screw America big time if they just refused to buy bonds, but then they sign their own death warrant, not to mention losing bundles on currently held US assets. Chasing yield is what moves the value of major currencies more than anything else, and this is a function of liquidity. Long term, I believe we are near the lows right now. Especially vs the pound and commodity based currencies. Just my 2 cents, Jay
volatility measures on the index are at relative low levels, usually precedes a waterfall decline, the fact that its hanging around support doesn't bode well. with oil and gold consolidated and pushing higher, the dollar in terms of a basket of currencys seems to be getting ready for a fall.
http://finance.yahoo.com/currency/convert?from=USD&to=RUB&amt=1&t=5y look what happened to the russian rouble as the price of oil appreciated and the dollar depreciated. 1 usd was 32 roubles now its down to 26 roubles.
If Iran goes through with selling oil only in euros. and if the action takes off & spreads somehow (unlikely), then I'd say there's a chance 80 could be tested. Iraq tried to pull the same oil-for-euros nonsense before the war, and the US put an end to that idea pretty quickly.. These Chinese tariffs aren't exactly USD bullish either.
US just fingered China, either China revalue its currency; or US is heading to recessions, which is its heading anyway. No problem for more rate hike, it will be a golden opportunity for bond buyer later. Just imagine another round of 30 years with 20% coupon rate. LOL