Can the sickly dollar ever recover?

With the US economy slowing and the prospect of further banking pain, monetary policy makers will be hoping the dollar can get off its sickbed. But the future is looking bleak for the greenback.

Ben Bernanke broke with tradition by voicing support for the US dollar and simultaneously taking a stance against inflation saying "In collaboration with our colleagues at the Treasury, we continue to carefully monitor developments in foreign exchange markets Dollar weakness over the past year has contributed to the unwelcome rise in import prices and consumer price inflation".

On hearing his remarks, the financial media and pundits generally took the view that it marked a reversal point for the dollar. They think he would not have said that unless he expected it to be followed by concerted central bank action to support the dollar. In spite of headlines and a fairly widespread consensus about dollar strength, as the chart for the dollar index clearly demonstrates it, has gone nowhere since March.

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