This is one of the main reasons why recent deal, when completed, will shoot CDE to 20 quickly when the bottom finally drops out from under the dollar - time is running short and a deceleration into recession should finally be the catalyst event. Foreign cash will also plunge into CDE as its US denominated assets become more and more of a bargain:
KYOTO, Japan, May 6 (Reuters) - Although Asian finance ministers have just agreed on a new contingency measure to defend their currencies, their real concerns appear to be a plunge in the U.S. dollar rather than a rise in their own units.
"Should the financial markets lose confidence in the U.S. dollar, huge capital outflows from the U.S. could lead to a rapid depreciation of the U.S. dollar, and thus dramatic appreciation of other currencies," Thai Finance Minister Chalongphob Sussangkarn told the annual meeting of the Asian Development Bank in Kyoto, western Japan.
Some Asian finance ministers voiced concerns over global imbalances -- a euphemism for the huge U.S. trade deficit and the large surpluses in Asia and oil-rich countries -- in their speeches to the ADB's annual meeting. Reuters Pictures Photo
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South Korean Finance Minister Kwon O-kyu said global imbalances were their central concern.
"Any abrupt and disorderly unwinding of these imbalances may send a tremendous shock through the global financial markets," Kwon said.
If the dollar falls further on speculation that the U.S. trade deficit can only be rectified by a cheaper dollar, that would give a headache to some Asian countries already nervous about the strength of their currencies.
Concerns that strength in the currency could sap exports and choke off growth pushed Thailand to take unusual capital control measures in December. Nevertheless, the Thai baht has continued to rally, hitting a 9 1/2-year high in March. Continued...