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Is The U.S. Dollar About To Reverse Course?
For the first time in several years the U.S. dollar has
managed to gain value against the world's other major currencies.
During the first three months of 2005, the U.S. dollar is up
approximately five percent against both the yen and the euro. The
gains for the dollar should be considered significant when
considering the United States still faces a growing trade
imbalance. So far this year, currency traders have shifted their
focus from the United States' large trade and current account
shortfalls toward the higher rates of returns being offered on
U.S. debt. The recent strength shown in the dollar has somewhat
shifted sentiment within the financial markets about the future
direction of the currency. A Bloomberg survey released earlier
this week shows that the major currency traders expect to see
dollar weakness resume later in the year, but the sentiment among
dollar bears is much weaker than it was at the start of the
year.
The strength shown in the U.S. currency thus far in 2005
should prove to be short-lived. The strong Gross Domestic Product
(GDP) growth during the past eighteen months will begin to show
signs of moving closer to more normal levels over the next couple
months. The signs of a slower economic growth will likely cause a
shift in sentiment among currency traders toward the more
fundamental problems facing the U.S. economy. The United States
trade and current account deficits show no signs of retreating
anytime soon. In fact, we expect the coming trade figures to show
further deterioration in the balance of trade over the next few
months. The major industrialized nations outside of the United
States continue to experience anemic economic growth. This
continues to place further pressure on the U.S. dollar as the
United States consumer continues to buy goods produced in Europe,
Japan, and China.
While we expect the dollar to resume its gradual fall against
most major currencies, the major wildcard in our forecast is of
course China. Recent information coming from China's top decision
makers indicates the Chinese are in no hurry to adjust the
current value of the Yuan-Dollar relationship. Should any talks
of a possible revaluation emerge later in the year, the downward
pressure on the U.S. dollar would quicken as currency traders
would buy the Japanese yen, and other freely traded Asian
currencies, that would likely benefit from a revaluation.
Mike Fitzpatrick writes for http://www.financial-watch.com
Is The U.S. Dollar About To Reverse Course?
For the first time in several years the U.S. dollar has
managed to gain value against the world's other major currencies.
During the first three months of 2005, the U.S. dollar is up
approximately five percent against both the yen and the euro. The
gains for the dollar should be considered significant when
considering the United States still faces a growing trade
imbalance. So far this year, currency traders have shifted their
focus from the United States' large trade and current account
shortfalls toward the higher rates of returns being offered on
U.S. debt. The recent strength shown in the dollar has somewhat
shifted sentiment within the financial markets about the future
direction of the currency. A Bloomberg survey released earlier
this week shows that the major currency traders expect to see
dollar weakness resume later in the year, but the sentiment among
dollar bears is much weaker than it was at the start of the
year.
The strength shown in the U.S. currency thus far in 2005
should prove to be short-lived. The strong Gross Domestic Product
(GDP) growth during the past eighteen months will begin to show
signs of moving closer to more normal levels over the next couple
months. The signs of a slower economic growth will likely cause a
shift in sentiment among currency traders toward the more
fundamental problems facing the U.S. economy. The United States
trade and current account deficits show no signs of retreating
anytime soon. In fact, we expect the coming trade figures to show
further deterioration in the balance of trade over the next few
months. The major industrialized nations outside of the United
States continue to experience anemic economic growth. This
continues to place further pressure on the U.S. dollar as the
United States consumer continues to buy goods produced in Europe,
Japan, and China.
While we expect the dollar to resume its gradual fall against
most major currencies, the major wildcard in our forecast is of
course China. Recent information coming from China's top decision
makers indicates the Chinese are in no hurry to adjust the
current value of the Yuan-Dollar relationship. Should any talks
of a possible revaluation emerge later in the year, the downward
pressure on the U.S. dollar would quicken as currency traders
would buy the Japanese yen, and other freely traded Asian
currencies, that would likely benefit from a revaluation.
Mike Fitzpatrick writes for http://www.financial-watch.com
 MORE RESOURCES updated Wed. February / 05 / 2025
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