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782 Posts by Anonymous "speculator":
but if you assume BRICS do well and USA dont:
CA will fall = less dollar excesses to mop up
looking on a supply/demand basis if the dollar will sell off into BRICS currencies due to capital inflows away from the dollar then why would the dollar weaken against non-BRICS. Investors wont be buying the Euro or Pound directly.
you will get the same relationship if you plot S&P 500 (not as strong) so it has got to do with risk appetite for global stocks. but if you are assume MSCI emerging markets will not be as correlated to non-emerging markets like S&P going forward then thats a different story.
but you could say that the dollar index is an inverse relationship with the MSCI, S&P etc so what has the emerging markets got to do with anything? global indeces remain quite interlinked and move together in the same direction much of the time.
plus, how can you confirm we are in a secular bear?
keeping rates artifically low can help for a while as it did in the early 2000s when the us was almost near a recession. then it all went belly up when bubbles were creating promoted by cheap us dollar short term rates.
the emerging markets cannot bring the US out of recession as they are net exporters.
why would us raise interest rates to benefit the dollar? it would have far more devestating effects on recovery.
i think part of the issue with a weak dollar was that too much was being sold off due to domestic consumption and dollar diversification into risker assets as part of portfolio investments abroad.
obvously anything could happen, china is backing up US dollar but may quietly diversify out over time but that could harm its exports to US. the fact that it has so much of the stuff it aint in chinas interest to see the dollar fall as they would substantially lose.
investors are less worried about debt ratings than they should. when the uk got a negative outlook from s&p (i think) the market quickly overlooked this stormed higher. that seems odd considering the uk is a small economy and a riskier currency than say euro in terms of reserve status.
the uk is in a similar position and it has not the benefit of being the world's reserve.
i agree the dollar has been in a bear for many years which means that furter weakness will be limited. the dollar used to be very expensive till 2000.