Wednesday, March 11, 2009

Roubini on the U.S. Dollar

The following is from the email I received this morning from the RGE Monitor.

U.S. Dollar Outlook

After a brief rally in risky assets earlier this year, the dollar has resumed its safe haven status once more. Dollar shortages for funding needs and deleveraging of cross-border USD-denominated liabilities is also still providing juice for the dollar against G10 currencies (except yen and Swiss franc). Against the euro, the U.S. dollar will likely remain strong in the near-term on expected ECB rate cuts, intensifying Eastern European financial turmoil and Eurozone sovereign credit risk. Against the yen, the U.S. dollar will likely stay around 100 yen in the near-term as markets focus on Japan's deteriorating economic fundamentals. The dollar will re-test its 2008 highs against other G10 and emerging market currencies but could back down on the expansion of U.S. quantitative easing to government debt. In general, the dollar will benefit in the short-term from U.S. government interventions if they appear to put the U.S. ahead of the curve in fighting recession. By the same token, any scent of increased Treasury borrowing needs on top of already all-time high levels of issuance could turn investors’ noses up at the dollar in the long-term.

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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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