Jen says there have been two large currency zones operating for the last decade: The European Monetary Union and the defacto dollar zone.
If the government of Los Angeles defaulted on its debt--which is possible, you know--does that mean that Los Angeles must leave the "dollar zone" and issue a new Los Angeles peso?
Mr Greenspan's greatness should be measured by his successful adaptation of American monetary policy to this world now dominated by capital flows, and especially at a time of increasing challenges from a growing dollar-zone through China and other dollar-linked emerging economies.
Similarly, the pound has tumbled in recent weeks against the euro and dollar as the euro zone's debt crisis has subsided, laying bare the U.K. economy's stubborn problems and weakening sterling's appeal as a haven alternative to the euro.
WSJ: Strong Start to 2013 Hints at Revival for Currency Funds
The wild card ahead for the U.S. dollar remains the Euro-zone.
FORBES: Outlook 2012: Can U.S. Dollar Bulls Keep Hold Of The Reins?
The data on what China invests in are sketchy but two things at least are clear: China has a stated desire to diversify away from dollar assets and the euro zone is the natural alternative.
ECONOMIST: Capital and companies from China are sidling into Europe
Lastly, the G7 commitment to prevent exchange rate misalignment following the prolonged financial crisis in emerging markets has prompted policy initiatives to create a loose target-zone regime among the dollar, yen and euro.
In foreign exchange markets, the euro stayed in a range against the greenback as traders focused on the ECB meeting on Thursday for news of any rate cuts amid a number of dismal economic numbers out of the euro zone, while the dollar continued to tick lower against the yen, weighed by the disappointing U.S. growth figure.
With exogenous red-lights flashing brightly in the euro zone, demand for the dollar is building.
Even with all of the dollar negative data though, the support zone slightly below 1.0300 has held sturdy.
If the euro starts to slip, support may be found between 1.2580 and 1.2600 with an extended move for the dollar perhaps making it to the next zone between 1.2470 and 1.2490 before becoming exhausted.
FORBES: As Consumer Lending in the U.K. Contracts, Pound Slides
European stocks closed in the red Wednesday and the euro erased gains versus the dollar as the woes of the euro zone continued to bug investors, highlighted by lackluster euro-zone economic data and a subdued German 10-year government bond auction.
This gap may explain the strength of the euro, which has risen against the dollar in recent weeks despite endless euro-zone sovereign-debt worries (see chart).
According to the commission's report, in 2000-05 oil exporters spent a bigger share of each extra dollar of export revenues on imports from the euro zone than they did in 1973-81.
Since late July it has risen 12% against the dollar, as the government debt crisis in the euro zone has eased.
One reason for this withdrawal is that international trade takes place in dollars, and risky-looking euro-zone lenders are finding it harder to access dollar liquidity.
The dollar was in demand as investors concerned about the next stage of the euro-zone debt crisis fled currencies and markets deemed relatively risky.
The long-term viability of the euro (once hailed as the next great reserve currency that would supplant the dollar) has repeatedly been called into question, and credit ratings on debt in euro zone countries have gradually been taken a hit.
Chinese officials said buying euro zone debt was its best alternative, but there is no doubt that wherever the dollar goes from here, China will continue to buy a lot of Treasuries.
This year, however, the dollar may very well go lower than the BRL1.64 level the government has basically set as their comfort zone before taking evasive action.
FORBES: Brazil Fails to Save Dollar; Likely to Give up Trying
应用推荐