Dollar Concern Remains Low

Comments from the German Economics Minister Guttenberg has played down the significance of dollar weakness on German exports and identified a benefit of a weak dollar in that it keeps oil prices down for Europe. Given sentiment, this is a close to a green light to sell dollars as one could hope for ahead of the weekend and the euro immediately poked up to $1.49. Only the lack of participation and sliding equity prices may limit the euro gains.

Nevertheless, the signal is important. Officials are watching fx but are not prepared to do anything about it and for good reason. The dollar has declined about 13.2% on a broad trade weighted basis since peaking in mid-March. But most of that decline took place in Q2. In recent months it has slipped only 2% on this broad trade weighted measure.

Moreover, the dollar's weakness is seen as orderly and consistent with fundamentals, in this case, the low relative and absolute interest rates.
Dollar Concern Remains Low Dollar Concern Remains Low Reviewed by Marc Chandler on October 16, 2009 Rating: 5
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