Dollar, Debt and Dominance

Last week when I touched upon the US dollar’s technical pattern, and the near-term potential for it to roll over a bit, I made mention of the lingering debt problem in the US. Especially when it comes to the US dollar, US debts are a growing concern that keep many analysts US dollar-bearish.

Most all reasonable analysts can accept the fact that, as we believe, the US dollar can rally based on money flow as its driven by risk – capital leaving risky assets in search of safety, i.e. the US dollar. We resurrect an article from the September/October 2009 volume of Foreign Affairs for (now common) reasoning behind this dynamic: