Dollar set to depreciate
The dollar's weighted-average value declined about 25% between early 2002 and early 2004. But it has essentially fluctuated around its 200-day moving average – an important technical indicator – over the past month or so. Its value is determined by the interaction between the current account deficit, which generates a demand for FX, and net capital inflows into the US, which generate dollar demand. We argue that:
A significant decline in the current account deficit does not appear likely in the
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