Dollar on the rack

01 June 2009 @ 07:05 am EDT

Underlying confidence in the US dollar will remain weak in the short term with a lack of confidence in the debt situation. Optimism over the global economy will also reduce defensive demand while there will be further underlying fears over medium-term diversification away from the dollar. Caution is required over the global economy given that there are still substantial risks with markets getting ahead of the situation. The dollar should also be supported by a higher domestic savings ratio. Momentum for a weaker dollar will remain powerful in the near term with the risk of a move to 1.4330 region before a sharp corrective dollar recovery.

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