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Friday, October 15, 2010

The Currency Wars are getting closer.

Enjoy the spiraling ride:

Today’s USD slide and EUR, GBP, JPY & AUD gains serve to highlight the ever decreasing (or perhaps that should be unvirtuous) circles of FX intervention and reserve diversification, i.e. Asian central bank intervenes (buys USD), then diversifies USD, thereby putting renewed downward pressure on the USD, which in turn forces more intervention. I believe this is known both as ‘chasing your own tail’ and an ‘accident waiting to happen’.


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