In recent months, prices of commodities and precious metals have begun to soar, a phenomenon that typically precedes a fall in the value of the USD. Many analysts have begun to speculate that a massive correction will soon beset the Dollar, as investors face the reality that the US twin deficits must be reined in before it is too late. Currency traders who remain bullish on the USD are now turning to technical analysis to justify their positions, rather than fundamental economic analysis. Based on current exchange rates, US consumers simply have no reason to slow their consumption of foreign imports, which remain relatively cheap. A depreciation in the USD will send consumers the signal they need and restore the current account balance to a sustainable level. The Asia Times reports:

Some believe higher interest rates may save the dollar as higher rates attract more investments. This analysis ignores the fact that as of the end of last year, the US pays more in interest to overseas creditors than it receives from overseas investment.

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