Concern continues to grow about the U.S. dollar, and for good reason: the U.S. dollar index is near a 2 1/2 year low. It is fast approaching the December 2004 low of 8085. The all-time low in the U.S. dollar index is 7819...and that was 15 years ago back in September 1992.So what's making the dollar drop?
It's the growing concern about capital flow to the United States.
It's a simple equation: U.S. interest rates are still high on a relative basis, but many other countries in the world are catching up fast. And with the U.S. Federal Reserve apparently on hold for the time being - and the possibility of a Fed rate cut still in the mix due to slower economic growth here at home - investors prefer to stash their cash in other currencies that enjoy stronger fundamentals.
In other words, traders are sending their money elsewhere, because they expect European yields will continue to gain and move higher than in the U.S., especially if the slowdown theme in the U.S. gathers momentum.
So, my friends, still long on the dollar?
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