Today on CNBC we discussed the role of the dollar in regards to FED policy–if the dollar continues to rally is it doing the Fed’s work. Short answer is yes. As a rising currency acts as a tightening–we are not far along enough–in this fragile global environment the Fed will be careful. We must be cautious though as the dollar presently is reacting to euro weakness due to stresses in the EU. The currency to watch is the yen. If the yen were to break it would mean the dollar is being suplanted as the funding currency–we are watching this carefully as the Japanese would love for the Yen to be driven lower.
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