The U.S. “strong dollar” policy continues to work its magic:
The dollar faced renewed downward pressure on Tuesday, falling to fresh three-year lows against the yen and within sight of record lows against the euro, amid mounting concern over the scale of the US current account deficit.
Economists believe stronger US growth will not prevent the slide in the dollar, since it would lead to a further widening of the current account deficit, expected to reach $570bn this year.
The dollar dropped below Y110 for the first time in three years, prompting market reports that a subsequent rally was the result of further intervention by the Bank of Japan.
The dollar also hit a seven-year low against the Canadian dollar.
While this trend may provide a short-term boon for U.S. exporters, it can’t be sustained indefinitely. At some point, foreign intervention won’t cover for America’s growing trade and governmental deficits. And then we’re going to have problems on both sides of the oceans.