It is officially a New Year, a New Decade and we want to wish everyone the greatest success! As we look forward to 2010, many people may be wondering if the dollar will continue to strengthen. Before attempting to address this question, it is important to recognize that much of the weakness in the U.S. dollar over the past year has been triggered by the Federal Reserve lowering interest rates to record lows. The primary reason for the latest strength in the dollar is also rooted in the belief that the U.S. recovery is accelerating and therefore the Fed could implement their exit strategies and raise interest rates earlier than previously anticipated. Based upon Fed fund futures, the market is currently pricing in a rate hike by the U.S. central bank in the second half of the year. There is currently a 57 percent chance of a rate hike at the June meeting followed by an 80 percent chance of a hike in August.
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