We see the USDX at a hair over 96, and above its longer-term average. The rate differentials regarding the United States debt versus the rest of the world, especially the developed world, is noted.
With Greece and Italy’s sovereign yields less than the United States comparable treasuries, the money continues to flood into the United States markets.
As long as the dollar is the reserve currency, the United States is afforded a great luxury in its borrowing and spending efforts.
Given the current circumstances and trajectories versus the other nations whose currencies comprise the USDX basket, it is likely that the US dollar index could touch 100 over the next year. At that point the FED will most likely begin to entertain scaling back its ambitions.
It seems interesting that the dollar index did not fall below 90 on any sustained basis, though it touched it twice. I note this action and wonder if there is official management at play to keep the major currencies within a certain trading band.
If all of this massive fiscal spending being proffered gets scaled back or delayed indefinitely, we could see a further confirmation of the one to two year trend until the dollar touches 100 on the USDX.
By its nature, the reduction of quantitative easing or even its contemplation of a reduction is dollar bullish, as global investors tend to need those dollars to repay debts.
The dollar is still king and only one set of circumstances is going to take it out. If a bunch of bumbling politicians in DC has no effect, nor do trillions of dollars in fiscal spending, the system still has legs.
Run, greenback, run!