Wednesday, November 11, 2009

Strong Dollar

Once again a US Treasury Secretary has affirmed support for the strong dollar.
U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation’s interest and the government recognizes the importance it plays in the global financial system.

“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar,” Geithner told reporters in Tokyo today.

This despite the fact that the dollar fell to a 15-month low against major counterparts (click here for a picture of the DXY index) and will continue to slide as the US adjustment to our large current account deficits continues. This ignores any slide due to fears of inflation from large budget deficits. As the economy recovers imports will rise and thus we will need more dollar depreciation for the current account to adjust. If those who fear that deficits will lead to future inflation are correct then the dollar's slide will be even larger.

But at least we love that strong dollar!

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