Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

A Dollar Correction Could Spoil The Party

Courtesy of ZeroHedge View original post here.

By Ye Xie, macro commentator at Bloomberg Markets Live

There’s a growing risk of the dollar correcting higher. The nominal yield advantage of the U.S. has steadily increased relative to other G-10 currencies in recent months, accelerated by the expectations of further government spending now that the Democrats control Congress and White House.

The yield difference between the U.S. and Germany has increased to the highest since the U.S. lockdowns in March. Even China’s yield advantage versus the U.S. is narrowing.

Rate differentials haven’t been a prominent driver for exchange rates lately, but if more spending leads to U.S. economic outperformance, the dollar could move to the right side of the “smile curve,” where stronger growth means a higher dollar.

To finance the twin U.S. deficits, foreign investors need to be compensated either by higher yields or a weaker dollar. The former reduces the need for the latter.

A weaker dollar is part of the reflation trade that has benefited everything from equities to commodities. A corrective move in the dollar could spoil the party.

 


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!