There's a real good chance we're going to break $1.23 in the coming three months or so as the Fed indicates a pausing in the tightening cycle.
I don't think foreign investors buy these comments from Snow, and that the U.S. believes in a strong dollar. It is a bit old and one of the reasons why you have not seen the flows into the U.S. to support the dollar.
Once investors shun away from U.S. investments, then the current account deficit becomes an issue. It will weigh heavily on the dollar.
The market did react quite negatively to the dollar as this rumor triggered speculation this administration may be giving up its strong dollar policy.
The Australian dollar is a proxy for global growth. My concern is of a more precipitous decline in the Australian dollar under the scenario of faltering global growth.
Growth is still quite strong and therefore there may be more room to hike. When you look at the interest rate differentials they still favor the dollar.
The dollar has been propelled by cyclical factors, namely the Fed raising rates boosting the dollar.
The risk is that the dollar becomes stronger if there is any hint that the economy remains buoyant and the markets start to price in a greater probability of another rate hike in March.
Japan is a much larger holder of Treasures, so if they made any change in their foreign exchange policy, that could have a significant and immediate impact on U.S. markets.
The Fed is closer to moving to a pause in monetary policy. We've turned more bearish on the dollar.
