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Dollar Strength Will Be Fleeting as G20 Meeting Begins

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Tuesday, 31 Mar 2009 10:20 AM Current | Bio | Archive

The OECD has now shown the world its worse-than-general-consensus recession and unemployment expectations.

From the report: "Economic activity is expected to plummet by an average 4.3 percent in the OECD area in 2009, while by the end of 2010 unemployment rates in many countries will reach double figures for the first time since the early 1990s … The global recession will worsen this year before a policy-induced recovery gradually builds momentum through 2010."

Yes, they see a light at the end of the tunnel. Now, let's hope it's not an outbound Amtrak.

That said, and with that extremely sobering OECD report in mind, it's with some bemusement that I received a copy of a letter that was sent March 26 to President Obama from the Congressional Committee on Ways and Means wherein the Democrats asked for punitive legislation against China's supposed manipulation of their currency.

This letter literally astonishes, considering the growing demands being placed by the U.S. deficit-financing needs as well as because of China's growing concern over the security of its U.S. dollar assets. I don't think it's an exaggeration to consider this letter as hardly conducive for securing of the Treasury's long-term financing needs, and hence to the stability of the U.S. dollar over the long term.

So, we can be sure that more awful data will come out the pipeline for some time to come.

These are really confusing times for the investor. There is no doubt that strong forces are building that will ultimately undermine the U.S. dollar over the long term.

Nevertheless, in the meantime, the dollar's current role as a safe-haven status is being put to good use in a week that may ultimately test the notion that global equity markets are on the road to recovery. Major equity markets have recovered some ground early in trading and the dollar has eased back accordingly.

However, it remains to be seen how markets will cope with the disappointment that probably will result from this week's G20 meeting, beginning Thursday. Of course, the G20 will boost IMF funding, but there will be no discussion of further fiscal packages. If weakness in the stock markets develops, we should also see the U.S. dollar end the week on a particularly positive note.

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HansParisis
The OECD has now shown the world its worse-than-general-consensus recession and unemployment expectations.From the report: "Economic activity is expected to plummet by an average 4.3 percent in the OECD area in 2009, while by the end of 2010 unemployment rates in many...
doillar
375
2009-20-31
Tuesday, 31 Mar 2009 10:20 AM
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