[DcifrThs]

[ QUOTE ]
Overall do you guys think this will continue to lower the overall value of the US$? If so, what do you think the ramifications of that could be?

[/ QUOTE ]

tough to say.

+US$: recession or slow growth means lower spending and reduced CA deficit, lower import demand. further, the lower the dollar falls, the more attractive its goods look to foreign purchasers.

-US$: recession or slow growth means the fed will likely lower rates hurting IR diff trades (as zero EV as they may be overall, they are still done).

+US$: slow growth in the US may increase demand for undervalued US assets and as the economy hits the trough, demand for equities & bonds will rise in international circles (especially sovereign wealth funds whose reserves are massive). this effect would not likely take affect till after the fact of recession hits obviously.

regardless, the ramifications obviously depend on the sign and size of the price change of the trade weighted USD.

i highly doubt the USD will appreciate throughout all of this. i could see positive feedback loops seriously hurting the economy once it gets falling (and incent the fed to lower rates to ensure a soft landing). demand for US assets could seriously fall as other knock on effects are seen to reduce economic performance (equities & bonds).

things like this are obvoiusly complex.

global risk aversion seems to push up demand for short dates US debt. but only to an extent. very likely not enough to prop up a fundamentally weak currency.

Barron