Tuesday, October 12, 2010

US is actively working on engineering a cheaper dollar

Thats what Axel Merk was quoted saying in a recent article by Tom Lauricella in the WSJ.

The full quote is:
"The U.S is saying, 'These bad Brazilians, these bad Japanese,'" for wanting their currencies to fall, said Axel Merk, chief investment officer at Merk Investments. "But it's the U.S. that is actively working on engineering a cheaper dollar."
This is interesting to keep in mind considering my previous post which can be read here.  Nonetheless Lauricella goes further by quoting Steven Englander
Steven Englander, currency strategist at Citigroup, says that while U.S. officials would want to avoid a dollar drop that destabilizes the stock or bond markets, "if the dollar dropped 1% a month for the next 12 months … they wouldn't think that is a bad outcome."
 1%! Really! Dont get me wrong ... 1% isnt always insignificant but compared to the whole picture, would anyone consider 1% a true threat?    
Some traders have been saying the dollar's recent decline was looking overdone. Since early June it has fallen 13% against a broad basket of currencies known as the U.S. dollar index. But bearish sentiment on the dollar was revived Tuesday afternoon. While the markets were already expecting the Fed to ease policy through purchases of U.S. Treasurys, the Fed was shown to be considering other steps to have a bigger impact.
I believe this "bearish sentiment" is more than backed up and will continue into the foreseeable future.

1 comment:

  1. What about this one world currency I'm hearing about these days?