Until the US throws the market a bone, the dollar is going to keep falling…
What sort of bone? A big honkin’ spending program of some sort needs to be abandoned, quantitative ease needs to be modified or tax hikes of some sort need to be announced to close the yawning budget gap, a very tough sell in the midst of a deep recession.
Geithner and Summers are veteran of the Clinton administration which was very attuned to the bond/forex market. The Obama administration has shown no such sensitivity yet, but it is early days yet. Geithner is no doubt getting an ear-full in Beijing, so perhaps that could change. Stay tuned.
