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The Great Dollar Pump of 2008: A Doomed Central Bank Intervention [View article]
1. Our fed fund rate had nowhere to go but up (even a severe recession whould not have created any more easing... we are at the least effective part of the curve). Euros equivalent had nowhere to go but down (they were clearly overplaying the inflation bogey man).
2. Asset values are badly distorted. Any commonsense measure will do. $10 Lattes in France, for example. Commercial real estate in large cities. The PE's of the stock markets...
Hot money chases the carry trade and cheap assets. Cold money chases the account imbalances.
At $1.40 neither of these factors is different than at $1.55, so I am not closing my position.