Instapundit - THE PERPETUALLY DOOMED DOLLAR David Altig poor mouths the dollar, pointing out that it fell on news that the Russian Central Bank decided to hold less of it, and that things are looking up in Japan and Europe.
Yes, well, when you're at the bottom of a pit, there's nowhere else to look but up. Japan is still struggling against deflation; EU GDP came in at an anaemic 0.3% in the second quarter (compared to 0.8% in America). There are a couple of bright spots in Europe, such as Ireland and Spain, but they are dwarfed by Germany, the EU's biggest economy, which had no growth at all in the second quarter, and France, which posted 0.2%. Italy rebounded from recession with an unexpectedly strong 0.7%, but as traders like to say, even a dead cat will bounce if it falls from a great enough height. These numbers are encouraging only because analysts had expected them to be worse still.
Until GDP growth improves elsewhere, America will continue to be the destination of choice for capital looking to invest in the rich world. That will boost the dollar (and our current account deficit). China's revaluation of the yuan was distinctly underwhelming (and as this article from The Economist explains, its currency peg is still heavily weighted towards the dollar), meaning that for the time being, it will continue to pour money into propping up the dollar.
Over the long run, of course, America's gaping current account deficit is not sustainable, and the natural path of adjustment is a decline in the value of the dollar. But given the countervailing pressures in the world economy, I wouldn't try to make any money betting against the dollar.
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