Unless something happens that is now unforeseen, most FX analysts expect a return of the status quo - rising growth nearly everywhere means the Great Recession is ending and it’s safe to seek yield in riskier places and in riskier assets (away from the US and the dollar exchange rate). We never had any right to expect that G20 and the IMF would be effective in pressuring the Chinese to revalue - they are weak organizations with no enforcement or compliance capability, and the Chinese know which side of the bread their butter is on.
It may well be that the US secretly took everyone aside and asked for reticence on China, since the weak US dollar rate really is good for the US economy, even if it’s not good for consumers, but then the US would have been risking a deeper drive out of the dollar as a reserve currency - so if it was some kind of ploy, it was a dangerous one. Does the US have a grand plan for the dollar? Almost certainly it does not, and any talk of US policy being designed to weaken the dollar deliberately is silly. Analysts suspected that was the not-so-secret Bush agenda but we have no evidence this is how the Obama Administration thinks. Still, "allowing" it to weaken (for a greater good like export industries) is another matter.
Clearly Washington is unfazed by the rise in gold (as long as it’s not fuelled by inflation expectations except by a few nutcases). That it is also fuelled by a bigger cohort who fret about budget deficits seems to be only slightly more worrisome. It seems that when it comes to matters pertaining to the dollar exchange rate and related matters like gold, the Administration is going to remain silent. We wonder if Obama even feels much pressure for results from the China trip this week. This is a laissez-faire approach that is not getting the attention and perhaps praise it deserves from those who think Obama is a control freak or a pinko or a big-government collectivist (to revive a Randian term now that two big Rand biographies are being reviewed).
We expect the US dollar Rate to embrace and surpass the 1.5000 mark now that it has kissed the level. Round numbers are nice, and will suffice - next stop, 1.5250.
Pounds to US Dollars = 1.6723
Pounds to Euros = 1.1148
Euro to Pounds = 0.8967
Pounds to Australian Dollars = 1.7997
Bye For Now
Barbara Rockefeller
Foreign Exchange Trading
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