The stock market was relatively calm Friday morning but market players are on edge ahead of this weekend’s G20 summit in Seoul.
With the world’s economic powers seemingly in a race to have a weaker currency than their trading partners, the threat of a currency war hangs over the conference.
Ahead of the confab, Treasury Secretary Tim Geithner sent a letter requesting the G20 “commit refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing appreciation of undervalued currency.”
China’s currency manipulation was the primary target of Geithner’s request, as was his proposal that G20 nations adopt specific targets to reduce trade gaps between specific countries.
The problem is U.S. policy appears designed to weaken the dollar without regard for our trade deficit, so Geithner seems, at best, disingenuous and, at worst, hypocritical.
Furthermore, S&P 500 companies are benefiting from a weak dollar, as Henry and I discuss in the accompanying clip. The dollar’s weakness makes it easier for U.S. multinationals to sell their goods abroad, a primary reason the stock market is hovering near its highest levels since Lehman Brother’s bankruptcy in September 2008.
For better or worse, the big threat to the bulls today is the communiqué coming out of the G20 meeting might help shore up the dollar, a big reason gold has fallen from its recent peak this week.
Posted Oct 22, 2010 10:56am EDT
by Aaron Task
Source: Yahoo Finance