Backing the greenback

Roger Hogan finds that rumours of Asian central banks ditching their US dollar currency reserves may have been exaggerated, although Asian-based currency traders still smell blood

For some time now, foreign exchange traders in Asia have been positioning themselves for a major realignment of the US dollar against regional Asian currencies. They have been encouraged by the long-term negative outlook for the greenback as a result of the United States’ worsening current account deficit and by the difficulty a weak US dollar creates for Asian central banks in the management of their US dollar-denominated forex reserves.

So strong is this view, it has led bond and forward