Global Newsbrokers Forex Service
New York forex analysis at 20:19:02
ECONOMY DOUBLE-EDGED SWORD FOR DOLLAR
Wednesday, January 12
The pick up in US economic activity is
something of a double-edged sword for
the dollar. On the one hand it leads
to upward pressure on interest rates
and results in the sort of hawkish Fed
minutes seen last week.
On the other hand, robust domestic
activity fuels demand for imports and
leads to the sort of trade data seen
today.
Last week the dollar rose, today the
dollar has fallen. The problem for
the US currency is the sheer size of
the current account deficit and its
hefty funding requirement. It is too
big to be just shrugged off by the
market, and it is the focus on the
shortfall that has undermined the
dollar in recent months, more than
offsetting superior US growth factors.
This looks like being a trend that may
continue for a while longer.
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