Exchange Rates and Interest Rates Tell Confusing Story

J.D. Foster / October 13, 2009

The dollar’s steady and sometimes fleet downward slide in exchange markets is eliciting a number of interesting explanations, but most commentators are only looking at their favorite piece of the economic puzzle. The dollar is under pressure against, well, every currency that matters. But why, and are there other financial markets oddities demanding attention, like U.S. interest rates?

Part of the explanation for the dollar’s slide is surely the Obama Administration’s pursuit of a wide range of policies sharing the singular characteristic that they would permanently weaken the U.S. economy. Higher taxes on businesses, higher taxes for health care, higher taxes for industrial manipulation in the name of the environment, all insufficient to dent massive deficits are hardly lures for foreign capital. (more…)