The Economy and the Credit Market

If there was any doubt to the dollar’s primary fundamental driver, the currency would forge a new 14 year low on a trade weighted basis and against its European counterpart while the Dow officially climbed above the 10,000-mark.
Investor sentiment is keeping the greenback held down while a current of optimism sweeps the markets higher. However, caution warrants a review of not only the dollar’s role as the financial whipping boy but also the endurance of the market’s exuberance.
To maintain its status as the premiere funding currency, the outlook for the US recovery and interest rates must be weaker than its liquid counterparts.
For the growth outlook, the world’s largest economy is on pace to emerge from recession at the same gait as most of its industrialized counterparts.
Warnings from policy makers about measured expansion after growth readings turn positive is applicable to all. Realistically, the dollar’s downfall is yield.
The Federal Reserve-set benchmark rate certainly has its influence; but investors are more concerned about real market rates.
With the US 3-month Libor trading at a discount to even the Japanese equivalent, funds are both cheap and abundant traits at which to borrow from but not invest in.
We will need to see speculative competitiveness to revive the dollar