What Now Greenback?

The US dollar had been buoyed by the easing of concerns that Fannie Mae and Freddie Mac would fail; a pullback in commodity prices, and weak European and Japanese economic data. However as the last full week in July drew to a close, the greenback lost its momentum as financial fears were rekindled and data shows that the US housing market has not yet bottomed. While some consolidation may be seen, we look for the US dollar to be generally firm in the weeks ahead, though we recognize its sensitivity to developments outside the range of visibility that drives oil prices back up or heightens perceptions of systemic risk.

Fannie, Freddie, Hank, Ben, and the Dollar

Over the past year, officials and investors have been wrestling with a three-pronged threat: a profound crisis in the financial markets and the circuit of capital, the loss of economic momentum, and inflation pressures, largely but not wholly a function of higher food and energy prices. Nearly every country is experiencing these threats, though the potency of each individual threat and the institutional capacity to address the challenges varies widely.