Many observers are converging towards a highly downbeat 2021 outlook for the dollar. The dollar may indeed fall this year, but an overly negative narrative is unwarranted. Mark Sobel argues that many arguments for a future slump don’t hold up. (OMFIF)
US twin deficits will tank the dollar…America has the world’s deepest and most liquid capital markets. It issues the world’s leading safe asset – US Treasuries. Interest rates are rock bottom and the Fed will continue buying a large portion of US debt issuance. If demand abates, slight yield increases will draw inflows back. Twin deficits might become an issue in the future. But in the meantime, America can well finance them.