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Battleground: The US Dollar

|Includes: UDN, UDNT, PowerShares DB USD Bull ETF (UUP), UUPT

The government has reported that the accounts deficit fell to $81.1 billion. This is the most balanced budget since 1999 and has reduced the need for dollars, increasing the decline in the dollar. Supporting the dollar, more domestic oil shale production has reduced the energy trade deficit. However, the greatest weight on the dollar will continue to be the QE. The inflation figure which was produced this week read a 1.1% rise in prices year-over-year. We know that this is understated by some 2%, but this is still a surprisingly low number. It points to the weak economy and that deflation is still rearing its ugly head if QE tapering continues. The dollar's future is largely inverse of the QE's future. The Fed says it will taper, but I don't think they will be able to maintain that course. UUP is rated "hold".

Disclosure: I am long UUP.