We advice all countries as well as private sector to take precautions against the dollar uncertainty . Not only due to inflation , but also the annual deficit of half trillion, plus foreign debt deficit of more than nine trillion dollars !! A country in war, is not at all safe for investment or as currency !!
Dollar woes seen continuing as Fed nears pause
By Nick Olivari - Analysis
NEW YORK (Reuters) - The dollar is rounding out its worst quarter in a year and a half on expectations the Fed is near the end of its cycle of interest-rate hikes, and few investors expect it to do any better in the next three months.
The U.S. central bank raised the key federal funds rate by a quarter percentage point to 5.25 percent on Thursday -- its 17th consecutive increase in two years -- and said more rises may be needed to curb inflation.
But analysts said the accompanying statement hinted at a pause in the Federal Reserve’s tightening campaign in August.
The extent and timing of any additional firming of monetary policy needed to battle inflation will depend on the outlook for both prices and economic expansion, the Fed said.
As central banks around the world lift rates, a Fed pause would further erode the dollar’s yield advantage.
"We do expect the dollar to weaken in a transition period for interest-rate policy," said Nick Bennenbroek, senior currency strategist at Brown Brothers Harriman in New York. "The Fed is close to the end of its tightening cycle, while the ECB is in the midst of tightening and the Bank of Japan is gearing up to tighten."
Higher U.S. rates made dollar-denominated investments, and the U.S. currency, more attractive to investors throughout 2005. Now, though, the European Central Bank is expected to lift the euro zone’s key rate from the current 2.75 percent, and an increase in Japan’s benchmark rate, long close to zero, seems imminent.
An end to Fed rate hikes would also signal to investors that the U.S. central bank sees the danger of recession as outweighing that of inflation.