Dollar Faces Increasingly Strong Set of Headwinds
Dollar was of course attaining its highest value. That too, in the last 4 years. But this was of course just few weeks back. Right now the scenario is different of course! It has fallen about 9% based on trade weighed in just two months of time. It fell to a just of ¥85.29.
Of course this was because of the economy. It has turned weak. The weak economy though resulted in various problems of course. The disappointing job figures are the examples. There was a double-dip recession. There were thus high expectations from U.S Federal Reserve.
Of course there was only one expectation from them. They should have headed off the risk related to such double-dip recession. This of course wasn’t fulfilled and finally let the dollar fall.
The experts have also put their views in this matter. The Asian countries seemingly will develop. They will of course develop more than the western countries. It is simply because the west is indebted. Many conditions are forming now obviously.
These conditions are for the return of dollar “carry trade” of course. The investors will have a lot of advantages in this. They of course will look for this opportunity. The U.S borrowing costs will be utilized. These will of course be low cost. This is absolutely why investors can take the advantage.
They will invest these somewhere else maybe. Of course they are going to invest in the high yielding assets. The Indonesian bonds are involved in these “carry trade” one dollar bonds. There is a lot of investment in the Indonesian bonds.
This has apparently helped set a record. But this has an effect on the price. This effect is no doubt inverse. Therefore the price has also fallen. This has apparently also set a record. This dollar carry trade now actually costs more than $750 Billion. This has been confirmed by Tim Lee. He works at a consultancy, Pi Economics.
The dollar economy will only though remain weak in one condition. That U.S economy remains weak of course.