Wednesday, November 07, 2007

Dollar: A Wile E. Coyote Moment?

by Bill McBride on 11/07/2007 01:28:00 AM

December Dollar Contract Click on graph for larger image

This is a graph of the December U.S. Dollar Index from Barchart.com.

This reminds me of Dr. Krugman's "Will there be a Dollar Crisis?" from July. Krugman wrote:

"... there will at some point have to be a ‘Wile E. Coyote moment’ – a point at which expectations are revised, and the dollar drops sharply."
On topic, check out this funny post at Krugman's blog: Modeling the falling dollar

And from Bloomberg: Dollar Slumps to Record on China's Plans to Diversify Reserves
The dollar slumped to a record low against the euro after a Chinese official said the government will favor stronger currencies as it diversifies $1.43 trillion of foreign-exchange reserves.

... ``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing.

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