Dollar Drop

Square in the Nuts spots an article in the British Times Online. In America, the focus is on interest rates and inflation, without considering the overall strength of the dollar. But what happens overseas is just as important as what the Fed does.

THE dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.

The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.

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Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.

“I think this is it,” said Tony Norfield, global head of currency strategy at ABN Amro. “The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies.”