torsdag 23 april 2009

FX Thoughts

Will the U.S. dollar rally continue? I don't think so, and this is why:

The greenback has rallied strongly since the start of the financial crisis, and the reasons put forward by various observers have primarily been that the crisis has created "safe haven" demand for US assets, and also led to unwinding of positions considered risky.

As risk appetite again increases, I would expect the dollar to fall*. I am looking for a quick and steep plunge of around 10 % within the next 90 days and, after that initial fall, a more gradual downward move.

*Against the EUR, CAD, GBP and SEK, to name the major ones i track. Against the JPY, I would, however, expect the USD to rise, as carry trade positions get set up.

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