The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone's troubles but America's fiscal health is worse than Europe's, an adviser to the Chinese central bank said on Wednesday.
Li Daokui, an academic member of the central bank's monetary policy committee, said that U.S. bond prices and the dollar would fall when the European economic situation stabilized.
"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about Obama's plan to extend tax cuts for all Americans.
"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."
U.S. Treasury prices fell sharply for a second day on Wednesday as the proposed tax deal sparked concerns over the government's ability to service its massive debt burden. Moody's Investors Service said it is worried the tax cuts could become permanent, hurting U.S. finances and credit ratings in the long run.
http://news.yahoo.com/s/nm/20101208/bs_nm/us_china_economy_growth
