Stability premium favors U.S. dollar

Trouble beyond the Eurozone

Elsewhere tensions continue to simmer in the Middle East over Iran. And then there is Syria where the civil war could destabilize a region that was carved up along artificial lines by its former European colonisers. 

Over in Asia, confidence over the Chinese economy could prove misplaced with reports of many basic industries such as petrochemicals and metals seeing reduced demand and in some cases idling capacity. The country has also been in the grips of a residential and infrastructure boom, which looks worryingly like a bubble. Meanwhile, the Bank of Japan is on a mission to print Japan back to growth in what could turn out to be a dangerous economic experiment.

Growth in the U.S. is hardly spectacular and there's sequestration taking place with steady tax rises and budget cuts, which will act as a further drag on the economy. But even with aggressive quantitative easing measures by the U.S. Federal Reserve that does leave the U.S. dollar for the time being looking like the least ugly of a very ugly bunch among the major currencies. 

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About the Author
Justin Pugsley

Justin Pugsley is the forex and gold markets analyst for New Zealand-based trading platform provider MahiFX. He is a keen student of markets, economics and history. Prior to working with MahiFX, Justin worked for a number of leading media organisations such as Thomson-Reuters and Dow Jones/Wall Street Journal.

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