Minyan Mailbag: Bermuda Triangle
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.
Trade deficit/ interest rates/ currency.
I'm puzzled as to what will hold the dollar together IF the Fed is now monetizing and foreigners are beginning to shun U.S. treasuries. When foreigners were taking the dollars from excess U.S. consumption and buying treasuries, the "excess" dollars were removed from the "float" and the dollar was protected from rapid devaluation.
IF foreigners now back off their U.S. dollar purchases and the Fed monetizes to keep interest rates low, doesn't that increase the global "float" of dollars? Or is the Fed also unconventionally shorting foreign currencies from Bahama headquarters?
Anxiously awaiting your esteemed insight.
I quite frankly do not know what is holding the dollar up against Asian currencies, especially with rumors of revaluing of yuan (although I don't think that is coming anytime soon).
Against the Euro the dollar may actually rally as it is oversold and theoretically at least the interest rate differentials and economic growth add support to the dollar.
The yen has me confused, so I am just watching and reacting at this point. If the Fed is monetizing I suppose "they" can hold the dollar together for a while until there is outright selling from Asia.
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