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The Dollar’s Weak Future

"Congress wants to weaken the buck against China's currency, and a broader devaluation could help the Federal Reserve stave off deflation pressures."

“If something’s got to be sacrificed to put the domestic economy on the road to a sustainable recovery, the dollar’s value against other currencies seems a good candidate. That’s what the Federal Reserve signaled this week—and what Congress, in no uncertain terms, is telling the Chinese. A new devaluation of the buck carries risks. Always high on any Wall Street list of potential calamities is the idea of a sudden collapse of the dollar. That still seems remote, though perhaps less so than in the past. Fed policymakers seem prepared to take their chances: They strongly hinted in their post-meeting statement Tuesday that they’re ready to flood the financial system with more dollars to try to push longer-term interest rates lower.”

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