This week, the USD dropped to a one-year low against the Euro and an 8-month low against the Japanese Yen. It seems everyone has a different explanation for why this is happening. Technical analysts argue that the Dollar is in an upward track against the Euro, and will continue to seesaw in an upward pattern. Fundamental analysts, meanwhile, feel the Dollar’s weakness is due to narrowing interest rate differentials, which will likely decrease the willingness of foreigners to hold US assets. Economists feel the depreciation is a product of economic imbalances, and that the massive US current account deficit has necessitated a ‘correction’ in the value of the Dollar. Reuters reports:

The dollar has been under pressure since the Group of Seven finance ministers last month called on China and other emerging Asian economies to allow greater currency flexibility to help redress global imbalances.

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