Commerzbank warns that the US dollar's current strength may be unsustainable in the long run due to the rapid growth of US external debt. The bank highlights that foreign investors are reaping higher returns on US investments compared to American investors abroad, leading to a widening gap in liabilities and claims. Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, points out that unless the earnings outlook for US investments improves significantly, the dollar is likely to weaken.
On December 27, the US statistical office will publish a figure that is unlikely to attract much public interest: the net foreign debt of the United States. Yet the development of the US external debt is ultimately crucial to how long the current US dollar strength can last, Commerzbank ’s Head of FX and Commodity Research Ulrich Leuchtmann notes.
This is the main reason why US liabilities are now growing significantly faster than US claims.”“I show that it follows that because US companies are to a significant extent owned by foreigners, a business-friendly US policy increases the US debt to the rest of the world, regardless of whether the US continues to import more goods than it exports or not.
US Dollar External Debt Investments Earnings Outlook Commerzbank
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