That’s an interesting perspective.
I would like to hear your explanation, what makes you think the dollar will strengthen.
The carry trade is now propped up by foreigners borrowing ultra cheap dollars. The only way I see the carry trade collapsing is for interest rates here to ratchet up. It’s hard to imagine that because the economy and especially housing are still really awful.
They are also depending upon a declining dollar. If the Fed cuts off the carry trade—probably unlikely—that would cause a rush to buy dollars and unwind the trade. What I think is more likely, another stock market crash sending investors into bonds. At the same time a last ditch swap effort with the central banks where they trade a few trillion in dollars for Euro’s, etc. Then they bid up the dollar and make it jump 5 percent overnight. This causes a panic and a massive unwinding of the carry. The only reason I believe this is possible is that everyone assumes the dollar is in a dealth spiral and its headed straight down. However, markets seldom every go straight down. The trend will assert itself over the long term, but during the short term there is plenty of manipulation and evil doing to be done. I’m curious and I would like to hear another opinion. Please let me know what you think.