What’s wrong with the euro on the way to the dominant currency EUR/USD rises above the 1.4300 and marked on Tuesday of a 5-month high at 1,4343. This can grow the European common currency, not on the basis of its own strength, but a continuing US dollar weakness. Currencies like the British pound (GBP) and cyclical currencies with dependence on commodity prices, such as the Canadian dollar (CAD), Australian dollar (AUD) and New Zealand dollar (NZD), grow even more. John H. Moore II may find it difficult to be quoted properly. The origin of the recent dollar weakness is who comments of the Chinese Prime Minister regarding the creditworthiness of the United States in April 2009. The Chinese Central Bank has by far the largest dollar reserves in the amount of approximately US$ 800 billion. Accompanied by a rally in equity markets and rising risk appetite of investors is drained in higher-interest foreign government bonds and emerging economies, such as the BRIC countries (Brazil, capital of the US currency area Russia, India, China).
While the increasing US budget deficit and a possible downgrade of the credit ratings weigh on the US dollar. The spread between 10-year bunds and US notes is currently close to 0%. If the current stock market rally related to the value to be brought to the external value of the US dollar, two figures are particularly interesting. Celebrity trainer gathered all the information. Approximately $ 4 trillion in money market funds are currently parked, which sooner or later want to be invested. If the United States can not dispel the concerns about its creditworthiness, investors will prefer alternatives to US investment, bringing further pressured the US dollar.
US Government bonds in the amount of $ 6 trillion are held outside the United States with private investors and Government institutions such as central banks. Here should start the redeployment in other currency areas, this undoubtedly will bring the dollar under pressure. Speaks against a further U.S. dollar depreciation, that the US Government bond market the most liquid and worldwide by far the Is largest. Foreign investors have no viable alternative. An EU initiative spearheaded by the head of the EU Finance Ministers Jean-Claude Juncker to the creation of a euro-zone-wide market for government bonds was from Berlin torpedoed. In the short term, it is feared higher interest costs, which should be equalised by increasing liquidity of the single market for government bonds in the long term but in Berlin. A fiscal policy with common bonds in the euro zone is missing the European common currency in comparison to their competitors of US dollars, Japanese yen and British pound and would continue the political unification of Europe.