Dollar exchange rate has a significant chance of further growth

Dollar exchange rate will grow

In brief: Liquidity is a major problem for the growth of the exchange rate dollar. The euro is still very weak.

Exchange Rate dollar investors worried about more than the euro. Faith in the dollar growth prevails among investors in 2010. While the results of recent auctions of dollar repo demonstrated a relatively low demand, giving rise to some columnists talk about what the situation is not as bad as it was in 2008, reports from Europe suggest there are reasons for concern regarding the situation in the banking sector.

We objectively expect more unpleasant surprises, and there is a feeling that the adjustment of banks’ balance sheets, the possibility that at one time referred to Trichet, could take greater extent than previously expected. The U.S. currency continues to demand, and although the banks are in no hurry to apply to the Central Bank, it does not mean that they do not have a serious need for dollar liquidity. Currency strategist BNP Paribas, for example, note that the line of currency swaps between the Fed and the ECB suggests rates from 1.00%, which still does not correspond to market conditions. In addition, they draw attention to the fact that those in the current environment will use the channel for liquidity, but will attract the attention of market participants and will give rise to speculation as to whether they have problems. The bank believes that the conditions of currency swaps will be reviewed, leading to an improvement in dollar liquidity, but some analysts see the risk that adverse developments in current conditions could be interpreted in a different light.

Anrey Torbinski
2010-05-26 23:00, Currency news.

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