When a currency as the dollar depreciates, falls in value, does this cause the buying of and commodities to go down ? Thank you

 

  • b2fnow 1:45 am on January 31, 2010

    Historically, the USD and stock market follow the economy. What’s good for the economy is generally good for both stocks and USD. But all of that has been reversed because of gov’t intervention and unusually low interest rates and the carry trade, where institutions can park billions of dollars for a risk-free trade for months or years. Essentially, they are borrowing USD’s (shorting the dollar) and buying other higher yielding currencies for an easy profit. If the dollar continues to decline, they make a handsome profit on top of the interest rate differential.

    I think you will have to see interest rates rising before things get back to normal.

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