The dollar’s current weakness is not a short-term phenomenon

Now, it’s clear that the dollar’s current weakness is not a short-term phenomenon, because, while the euro and GBP are unlikely to appreciate in USD terms much more, based on fundamentals, the ruble, yuan, yen and rupee are all going to trend upward over the next decade, making USD assets even more of a bargain. The Economist Intelligence Unit, for example, predicts that the RMB will be at 6.30 to the dollar in 2012, the yen at 91.8 and the INR at 36.8. Nevertheless, while diversification-motivated investment inflows from these countries into the U.S. are inevitable, the level of outward investment will depend a great deal on domestic investment opportunities and domestic growth in these countries.