Contrasting Views of the Fate of the USD
Here are a couple contrasting views of the fate of the US Dollar as perceived by the writers. The first article is titled “The End of the US Dollar” which speaks for itself. This article is what I believe to be the conventional wisdom, that Uncle Sam cannot continue to pump out massive amounts of Greenbacks without paying the price of a loss of confidence somewhere down the road.
The contrasting article is from CNN Money and starts with “The U.S. dollar moved higher against major currencies Wednesday as grim economic reports stifled demand for risky currencies like the euro and the pound.”
I suppose they can both be right if the time frame is extended far enough into the future.
What distinguishes currency values from equities is that while equities have an absolute value ($0.00 being one) that is related to corporate earnings, dividends, and investors’ perceptions – major currencies have only a relative value. You cannot ask the question “What is the Dollar worth” without completing the sentence with “compared to what?”
There is a whole world of carry trades, where big time investors borrow yen at minuscule interest rates to purchase assets denominated in euros, dollars and pounds, that could be evaluated mathematically with the right data, but other than that currency valuations are an ethereal construct based on thousands of opinions.
It’s all academic I suppose when you’re trading 1 minute EURUSD pairs but something to be mindful of if you’re planning a grand strategy. Even if you’re an expert value investor on the equities side it’s in currencies that technical analysis methods like Elliott Wave shine brightly.
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