Analysts at Goldman Sachs said concerns related to the U.S. economy could limit the scope for further dollar weakness.
Goldman Sachs analyst Michael Cahill and others pointed out that the United States is not currently experiencing a serious credit crunch, and the Fed’s recent data on a sharp decline in bank loans sent a “wrong signal” because these data reflect that the U.S. government is taking action to close the recent Failed bank.
That means the U.S. economy is unlikely to weaken enough to force the Fed away from its international peers and put downward pressure on the dollar, they said.
“Markets are over-pricing Fed policy divergence and dollar weakness is approaching limits on the US side,” they wrote.