Will The Dollar Continue To Rally?

The US Dollar index has made a nice move higher since the end of November with a gain of about 5%.  The important part about this rally is that the index has broken the long-term downtrend that it had been in since early 2009.  As shown below, the recent action in the Dollar looks a lot like the start of the rally that occurred in the second half of 2008.  In late July/early August of last year, the Dollar gained a quick 5% out of the gate when it broke a multi-year downtrend.  The currency went on to gain 25% over the next 7 months.  Will the recent break of the downtrend be the start of a similar rally?

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Comments

[chris]

the last dollar rally spike was the largest mass liquidations of assets in decades from hedge funds and overlevered debt up to 40-1 and a general panic about banks, solvency and government takeovers and even the fear of total collapse of ALL markets and capitalism. Today's move is a perfect technical move from the trendline prompted by short covering from the dollar carry trade into other foreign reserves and gold. If this was a real deflation spiral like last time then treasuries would be rallying too...they certainly are not.

[nomonos]

In this readers opinion, anyone who thinks in the long term that the dollar is sound is in fantasy land. We have massive debt and continue to print trillions of (fiat) dollars to cover that debt. Sooner or later, the dollar will fall.

[Roland Amann]

In what currency or basket (case) of currencies would you have central banks hold reserves.There is not enough gold in the world above ground or below ground to accomodate the reserve requirements of literally l90 countries(econo mies)only the currency of the still largest presently somewhat weakened economy in the world ,its oldest democratic form of government,and its continued promise of liberty and strength of its multiethnic population emanating from every country in the world (will ultimately proof that the US Dollar is more than a simple fiat currency subject the usual ramnifications in an economic malstream.Stop selling the Dollar short.A bleak future would stare you in the face but it will not happen.Our resources in the ground and wealth above the gound in private and government(peoples) hands is nowhere to be replicated.This currency will shine long after the Euro has vanished from its unsustainable staging based on nothing but a dream.No one yet will sell his propertyor other asset against the delivery of a truckload of potatoes or corn.

[Don Kennedy]

Eventually, central bankers will not be able to print fiat currency enough and sell enough gold to block the natural forces of poor financial fundamentals that theorized monetary and hysterical fiscal policies have given us. America's rise to world power was built on a strong dollar. It is not strong now and will get even weaker with Benniepower. Fundamentals win always!!!!!!!!... Don Kennedy

[ernest]

the dollar is no longer a representation of US economic fundamentals

in Russia and other former Soviet Union countries we use the USD

in the middle east, in South East Asia, Brazil and India we do large signif. transactions in USD

the argument that the USD is a dying currency is flawed: consider the deleveraging which shall continue, we are still nowhere near what we had in terms of liquidity created by the shadow banking system

good luck

[Stock Trader]

US dollar will continue to rally with usual technical pullbacks on the way. The reason for this is as follows:

Most of the world's debt is denominated in US dollars. This debt is the money supply. Here is how banks create our money supply:

http://www.tradingstocks.net/html/banks_create_money.html

We printed 2 trillion dollars. But we borrowed 50 to 300 trillion. This money needs to be paid back with interest! The interest portion is not even created yet. It will only exist with more borrowing. But when the borrowing / lending stops, or remains below necessary levels, it becomes very hard to pay existing debt!

This is why when the economy goes sour, the dollar goes up. It is a ponzi scheme. Without more borrowing, or without moe printing, there are not enough dollars to pay principal + interest.

We are facing towards the mother of all deflations!

http://www.tradingstocks.net/html/prepare_for_market_crash.html

[Vishwadass Kaniah]

The USD may seem in turmoil form US perspective, but like it or no the USD will be 'fully supported always'.

The only issue will be FED 'supplies...........