One theory says the dollar must fall because of the current account deficit. Adifferent theory says the dollar doesn’t have to fall as long as foreigners are willing to recycle their export proceeds back into dollar paper (something they just demonstrated their willingness to do in the latest capital flow report).
Meanwhile, interest rates are rising, which can only keep the capital inflow going. This is an equilibrium situation. Traders, of course, hate equilibrium. It deprives them of profit opportunity. They will be casting around for reasons (read: excuses) to push the market one way or the other. Possible “factors” include the price of oil, political turmoil, and statements from important government officials, especially the Fed, disclosing what they want. Does the U.S. government really want a lower dollar? It may be pressed to the wall to say so.
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