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Dollar Reversal or Continued Weakness?
- Thread starter SethArb
- Start date
I think that the main problem is that the recent annoucement for duty taxe (steel, wood, farm products, etc.) on many non US product have help to decline the dollars. Since then, probably many investors have sendback their money in euro or canadian dollars. Many big american finanacial have put a warning againt these duty taxe, and now we observe the result on the markets. Less money, lower indices!
In the 90 years, the fuel of the markets was that the free market across the USA and with the outside world, now too many restrictions.
In the 90 years, the fuel of the markets was that the free market across the USA and with the outside world, now too many restrictions.
Europe saw the Enron scandal and wonders if there are any more skeletons in the cupboard.
Tariffs on steel and lumber, expansion of agricultural subsidies - raise concerns about new obstacles to globalisation.
The US economy's renewed weakness has reduced US interest rates, already below those in Europe, making the US even less attractive to fixed income investors world wide.
The dollars sensitivity to all this is magnified by the nations reliance on foreign savings. Its trade deficit of $450 Billion a year requires something like $1.2bn a day in net inflows of foreign capital to sustain the dollars value.
Some in the markets are sceptical about the ability of O'Neill to handle any crisis in the dollar. Some wish for the return of Robert Rubin, Clintons second treasury secretary.
O'Neill seems to lack the sophistication to master the situation. His reputation for laissez faire has convinced many economists that he may wait too long before giving direction to the financial markets.
Meanwhile European leaders gleefully note the Euro approach parity with the dollar, healing their hurt pride in the process, and the pound decrease against the Euro.
The rise of the Euro brings inflation back towards the European Central banks 2 percent target, forestalling the threat of higher interest rates. Since Eurozone exports are less affected by price movements than those in Japan or America, the gradual rise of the euro is not expected to stifle recovery.
So the dollar falls and US shares do likewise.
Tariffs on steel and lumber, expansion of agricultural subsidies - raise concerns about new obstacles to globalisation.
The US economy's renewed weakness has reduced US interest rates, already below those in Europe, making the US even less attractive to fixed income investors world wide.
The dollars sensitivity to all this is magnified by the nations reliance on foreign savings. Its trade deficit of $450 Billion a year requires something like $1.2bn a day in net inflows of foreign capital to sustain the dollars value.
Some in the markets are sceptical about the ability of O'Neill to handle any crisis in the dollar. Some wish for the return of Robert Rubin, Clintons second treasury secretary.
O'Neill seems to lack the sophistication to master the situation. His reputation for laissez faire has convinced many economists that he may wait too long before giving direction to the financial markets.
Meanwhile European leaders gleefully note the Euro approach parity with the dollar, healing their hurt pride in the process, and the pound decrease against the Euro.
The rise of the Euro brings inflation back towards the European Central banks 2 percent target, forestalling the threat of higher interest rates. Since Eurozone exports are less affected by price movements than those in Japan or America, the gradual rise of the euro is not expected to stifle recovery.
So the dollar falls and US shares do likewise.