Monday November 9, 2009 - 15:42:44 GMT
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Cinneas.com - blog.cinneas.com
IMF says USD Overvalued
The IMF comments over the weekend that the USD remains overvalued saw a significant weakening in the USD overnight. JPY crosses jumped higher as risk trades were added to.
US interest rates are expected to stay low for some time to come, perhaps for another 12 months, and this is adding fuel to the weak USD fire. The G20 meeting in Scotland added to the stimulus discussion as they concluded stimulus must remain going forward until economies can get on a firmer footing.
All of this news makes sense to us. As we have argued, the upticks in growth we have seen in the US come as a result of stimulus strategies such as Cash for Clunkers and the First Time Homebuyers Tax Credit. Without these programs the US growth would be paltry.
We expect weakness in the USD to continue, and JPY cross trades to move higher as the risk trade gains further momentum. Only positive job numbers can change this trend.
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