
If you are looking for factors that can determine the US dollar’s short-term outlook, take a look at the current central bank-powered currency devaluations happening in Europe and Japan. While the ECB and Bank of Japan aren’t obviously advertising their monetary policies as conscious devaluation, the effect is the same. Both economies would benefit greatly from the decline of their currencies. Debt would be cheaper to service as well as exports easier to sell due to lower prices. The quantitative easing schemes currently being implemented or soon to be implemented work to devalue both the euro and the yen. This makes the dollar look stronger by comparison despite remaining questions about the strength of the US recovery.
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