So Where To For The US Dollar?

[Forexmentor]

Last weekend at the G8 meeting in Japan, officials gave a rhetorical boost to the U.S. dollar, with both U.S. and French finance officials speaking out in favor of a stronger dollar. Recently, Bernanke had an epiphany, and linked the weak dollar to a rise in U.S. import inflation. All this buzz has given rise to a stronger dollar, with its best advance in three years. But, how long can it last? While Bernanke appears to have rates on hold, at least for the time being, the ECB is likely to raise theirs as early as July, and the BoC has reversed its course and decided not to let rates fall any further. Added to which, strong growth in the U.S. would be needed in order for Bernanke to raise rates. Bottom line, traders chase yield, and interest rate differentials are still driving currencies.

Peter R. Bain
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