Flash: Improving US CA deficit, strong dollar – BAML

FXstreet.com (London) - Amanda Leung, strategist at Bank of America Merrill Lynch links the account deficit to the rising Asian markets financial vulnerability.

Key Quotes:

“An improving US current account deficit is closely associated with rising Asian market financial vulnerability”.

“An improving US current account deficit signals declining global liquidity – a problem especially for USD-short entities, ie those with external deficits and/or US debt”.

“As a risk case, we are concerned that the improving US current account balance could improve further, if the past relationship with the inflation adjusted trade-weighted USD is a guide (this is not our house view)”.