Foreign Currency Exchange

How long can the mighty Dollar remain strong?

Sterling & Euro weakness has provided an ideal platform for the Dollar to gain ground over the past few months as speculators appear to remain Bullish and support the US.

However, that is not to say that the US will always be the currency that panicked traders will turn to. Massive bailout efforts, rate cuts and stimulus packages have offered a sense of stability for the world’s largest economy; but this combined endeavour cannot prevent a recession or even a natural bear market. And, when financial conditions worsen and the economy continues its slide, policy makers will find they have few options left to curb the pain on a national level. Since US officials have been the most aggressive in their efforts, they could reach their limit first; and then the sanctity of US government debt will come into question. There are other countries that are less liquid but are experiencing better stability so perhaps the Dollar is set to slide in 2009.

But when exactly?

The vulnerability of the Pound and Euro will continue to underpin the Dollar in the short term and we can expect continued high levels of volatility throughout as the global economy tries to find its feet. It is therefore more crucial than ever to stay well informed by EMYC.