Costard

Forex: Why the Dollar Is Staying Strong

"We have made the point before that this is an entirely wrong approach. Currency trading has a strong underlying current of the here and now. Sentiment changes on a dime and it’s very difficult to marry a medium to long term picture to intraday gyrations. Standing on the sidelines and commenting on what we observe certainly has its merits."

Larger players like foreign cb's cannot shift their holdings on a dime. For the moment panic is keeping them in dollars, but a secular diversification from USD is only just beginning. A "strong dollar" means nothing if it, and the currencies it is measured against, are all falling in real value. For the moment this is weighed against asset deflation and lower spending, and with no clear winner I would agree that relative currrency stability is the order of 2009; however at some point a move that defies your "here and now" theory will take place, and wealth will resume its transition towards a medium that retains its value. Jury's out on what this will be... my guess is scarcer commodities, gold for its value or oil for its utility. Timeline is uncertain, but too short in any event to be cavalier about.