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The rally in US dollar has just started as housing and mortgage markets stabilize
Trisha Rowe
Mar. 18, 2008

US Dollar index is weak on speculation a housing slump will cause credit-market losses at banks to widen. But the fundamentals for dollar has all on a sudden changed.

the Federal Reserve lowered its benchmark rate by 75 basis points to 2.25 percent yesterday and said that economic activity has ``weakened further.''''

The Fed is wrong again as usual. The economy is stabilizing. The super liquidity it injected in the system is creating the stage for a second real estate bubble after bursting of the first. Soon the real estate market will start exploding on the upside with people ‘flipping’ properties again.

The mortgage borrowers will start borrowing more and continue to pat y the mortgage. The party will be challenged again after nine months or so. That time the third wave down will melt the financial markets and Federal Reserve will have to stand and just watch.

The rally in US dollar has just started as housing and mortgage markets stabilize. Dollar will gain because of three other reasons. Lower, budget deficit, lower trade deficit and a resilient US economy at least for now.

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