All eyes have been on the Fed in the past 24 hours - and all currency gyrations, particularly the dollar’s sharp depreciation - have been attributed to the Fed’s move to spend $300bn on buying long-term Treasuries, among other measures. As some currency analysts observed on Thursday, however, the dollar’s steep decline suggests there may have been some over-reaction to the Fed’s move.
But there are other factors at work behind the dollar’s downward trajectory - not least, growing disenchantment in some parts of the world with US economic policies (or lack thereof), and rumbles about dumping the dollar as the world’s reserve currency and adopting a shared basket of currencies.In an article about a gathering of top Asian think tanks on Thursday in Tokyo, Reuters reported:The role of the US dollar as the key global currency will decline after the financial crisis, and its value may also weaken due to America’s current account deficit, officials at some of Asia’s top think tanks said....MORE
Thursday, March 19, 2009
The US dollar, the Norwegian krone and the ‘ugly contest’
From FT Alphaville: