US Dollar Hits Multi Months Highs Against Major Currencies As Trade Deficit Narrows!

US is emerging as a global energy powerhouse. It is being reported that US will become a major oil and gas exporter in the coming 2 decades. The discovery of shale gas has turned into a boom in the oil and gas industry. With less energy dependence on foreign oil and gas, the trade deficit is declining. This decline in the trade deficit has the secondary effect of making US Dollar bullish against most major currencies. Recently US Dollar hit multi months high against most major currencies.

In the past analysts had been persistently warning that a ballooning trade deficit will trigger a sharp sell off of the US greenback as the market tries to correct the trade deficit. This drastic depreciation of US Dollar would hurt the investor confidence and flow of wealth from abroad to US can get hurt.

But not anymore, with the trade deficit on the decline, it is expected that US Dollar will stay bullish for quite a long time. The trade gap “was a ready-made argument for dollar bears,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “Now sentiment has shifted, and you focus on the divergence of monetary policy and growth differentials,” he added.

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