As I was saying . . .
Good ol' Mr. Washington isn't dropping his jaw over the new Britney Spears photos.
While this most recent decline in the USD has been under way since November of last year, the real dramatic slide began just after Columbus Day. Up to yesterday, the broad dollar is -2.4% and the major currencies dollar is -3.3% over just these seven weeks. And as usual, dollar decline is vented upon the European currencies first and foremost: the USD is -5.4% against the euro and -5.8% against the pound since 10/10.
It will be interesting to see the October 2006 TIC data when it comes out on December 15. For the 12 months up through September 2006 the US was importing in net terms around $75bn per month of both long-term and short-term portfolio investment. That figure is a bit deceptive, however. In recent months, foreign net short-term portfolio investment has completely dried up. Perhaps long-term purchases have begun drying up, too, over the last two months. We'll have to wait another two weeks for a peek at the data.
In the grand scheme of things, this is not a bad outcome for the US. It would be better if dollar decline could vent against the Asian currencies more, but overall decline is a good thing in the big picture. One just needs to hope that these tremendous global imbalances unwind relatively slowly rather than precipitously. I'm the last person in the world who wants to see Volcker Shift II.