You must be assuming that the exporting countries in Asia are very rapidly going to develop a strong consumer base to absorb their excess capacity. My assumption is that the US will still, with futility, attempt to act as the buyer of last resort. If my assumption is correct, then our current account deficit is not going to show signs of reversing the current trend, and if that assumption is correct, then the dollar has to move further down until that trend does get reversed. I don't see such a reversal until we have a serious recession here (not a one and a half quarter of minimal contraction, but three quarters at least with contractions in the 1.5% to 3%...
Zeev
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