Stock market and dollar act completely uncoupled now. The dollar we measure through the DXY ETF. Some-one should tell these computers they have to go the other way around.
Showing posts with label dollar. Show all posts
Showing posts with label dollar. Show all posts
Thursday, 10 September 2009
Tuesday, 8 September 2009
Inspiration
From the FT:
The dollar fell to its lowest level in almost a year on Tuesday as a rally in gold prices above $1,000 an ounce and fresh concerns over its reserve status weighed on the US currency. Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ said the dollar's near-term prospects did not look particularly encouraging. "Gold has just broken through the $1,000 level and this along with the dollar index approaching its lows may well encourage another wave of speculative dollar selling," he said. The dollar index, which tracks its progress against a basket of six major currencies, fell to a low of 77.398, breaking through the lows it hit in early August to fall to its weakest level since September 30 2008.
• Gold mining ETF GDX rockets 12%... gold jumps over $1,000 an ounce.
• Teen retailers Gap and Aeropostale hit new highs... Abercrombie drops 12% last week.
• Semiconductor makers extend gains... Silicon Labs, Advanced Semi, and others reach 52-week highs. Sphere: Related Content
The dollar fell to its lowest level in almost a year on Tuesday as a rally in gold prices above $1,000 an ounce and fresh concerns over its reserve status weighed on the US currency. Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ said the dollar's near-term prospects did not look particularly encouraging. "Gold has just broken through the $1,000 level and this along with the dollar index approaching its lows may well encourage another wave of speculative dollar selling," he said. The dollar index, which tracks its progress against a basket of six major currencies, fell to a low of 77.398, breaking through the lows it hit in early August to fall to its weakest level since September 30 2008.
• Gold mining ETF GDX rockets 12%... gold jumps over $1,000 an ounce.
• Teen retailers Gap and Aeropostale hit new highs... Abercrombie drops 12% last week.
• Semiconductor makers extend gains... Silicon Labs, Advanced Semi, and others reach 52-week highs. Sphere: Related Content
Thursday, 3 September 2009
Dollar
At the same time the gold price is climbing, we observe also strength in the dollar. Sentiment is bearish, but the odds favor more and more the other way.
Everybody thinks the dollar is doomed. However, if the whole planet looks in one direction, the trade is done at the opposite side.
Look to this chart and the wedge.
We like the PowerShares US Dollor Index Bullish Fund ETF (ticker: UUP) tracking the performance of the US Dollar index as a tool to play an eventual break out.
Sphere: Related Content
Everybody thinks the dollar is doomed. However, if the whole planet looks in one direction, the trade is done at the opposite side.
Look to this chart and the wedge.
We like the PowerShares US Dollor Index Bullish Fund ETF (ticker: UUP) tracking the performance of the US Dollar index as a tool to play an eventual break out.
Wednesday, 12 August 2009
A crowded trade...
Beware of crowds.
Will the FOMC announce new measures tonight in order to reduce the quantitative easing? If they do it will boost the dollar further.
This is a crowded trade where the crowd is/was bearish. So move it in the other direction if you wanna earn some bucks.
Sphere: Related Content
This is a crowded trade where the crowd is/was bearish. So move it in the other direction if you wanna earn some bucks.
More about the slowdown ...
From Dave Rosenberg
In the strangest of days, the stock market sold off, but the dollar sold off too. Usually when the equity market goes down, the dollar improves from a flight to safety. This time around, the flows were into the Yen. And despite the decline in the dollar, things that are priced in dollars all went south, from copper (China's imports of copper fell in July for the first time in six months — and by 15%!), to gold, to oil (don't look now but crude is down four months in a row). The CRB index got clocked two points and based on the performance of the Baltic Dry Index, more declines are likely over the near-term. Only the 11bps rally in the U.S. 10-year Treasury note made sense (then again, this is in the face of a $75 billion supply calendar). But the 3-year T-note auction did go very well (amazing what can happen after the market cheapens up like it did) with a strong bid-to-cover ratio of 2.89 (versus an average of 2.52 at the last seven auctions) and a record 62.5% indirect bidding, which was the strongest since this maturity was brought back into the fold in November 2008 (now that was impressive). What happened to the foreign buyers' strike?
Sphere: Related Content
In the strangest of days, the stock market sold off, but the dollar sold off too. Usually when the equity market goes down, the dollar improves from a flight to safety. This time around, the flows were into the Yen. And despite the decline in the dollar, things that are priced in dollars all went south, from copper (China's imports of copper fell in July for the first time in six months — and by 15%!), to gold, to oil (don't look now but crude is down four months in a row). The CRB index got clocked two points and based on the performance of the Baltic Dry Index, more declines are likely over the near-term. Only the 11bps rally in the U.S. 10-year Treasury note made sense (then again, this is in the face of a $75 billion supply calendar). But the 3-year T-note auction did go very well (amazing what can happen after the market cheapens up like it did) with a strong bid-to-cover ratio of 2.89 (versus an average of 2.52 at the last seven auctions) and a record 62.5% indirect bidding, which was the strongest since this maturity was brought back into the fold in November 2008 (now that was impressive). What happened to the foreign buyers' strike?
Monday, 20 July 2009
A weaker dollar - another view
More about the relative value of currencies. The Economist released its Big Max Index past weekend. The index looks at the relative cost of Big Mac in various countries to gauge how over- or undervalued the currencies in those places are.
“The Economist” has developed the Big Mac Index as a way to determine if currencies are overvalued or undervalued. The thought is that a McDonald’s Big Mac being pretty much the same everywhere around the world, one should expect the cost to be the same as well.
Last year the most overvalued currency right was the Norwegian Krona, with the Big Mac +121% more expensive in Oslo than in the US. Hong Kong and Malaysia have the most undervalued currencies, a Big Mac costing 52% less there than in the US.
Now look to this:
The numbers marked in red are the areas I would like to highlight. They are representative of massive currency overvaluation in Europe (+72% in Norway, +55% in Denmark, +29% in the Eurozone) and absurd levels of undervaluation in Asia (-49% in China, –52% in Hong Kong, –47% in Malaysia and –42% in the Philippines).
So what does this mean for the U.S. Dollar going forward? The U.S. currency depreciation against major free-floating developed economy currencies is over. The Euro is 50% overvalued, Sterling is 28%. There is not a lot of upside to that trade from here. On the other hand, the Asian and Middle East currency pegs are at some risk of busting wide open. The Asians and Middle East have held their currencies way too low for way too long. Inflation is rife in these countries as a result. It is only a matter of time before new pegs are found or a currency basket is used to replace the dollar peg. For China, the timing will be critical as their currency is significantly undervalued and protectionist sentiment in the U.S. is sure to mount as the slowdown takes hold.
On the whole, the U.S. Dollar should continue to be weak. But, weakness should come at the expense of Asia and the Middle East more than Europe.
Sphere: Related Content
“The Economist” has developed the Big Mac Index as a way to determine if currencies are overvalued or undervalued. The thought is that a McDonald’s Big Mac being pretty much the same everywhere around the world, one should expect the cost to be the same as well.
Last year the most overvalued currency right was the Norwegian Krona, with the Big Mac +121% more expensive in Oslo than in the US. Hong Kong and Malaysia have the most undervalued currencies, a Big Mac costing 52% less there than in the US.
Now look to this:
The numbers marked in red are the areas I would like to highlight. They are representative of massive currency overvaluation in Europe (+72% in Norway, +55% in Denmark, +29% in the Eurozone) and absurd levels of undervaluation in Asia (-49% in China, –52% in Hong Kong, –47% in Malaysia and –42% in the Philippines).
So what does this mean for the U.S. Dollar going forward? The U.S. currency depreciation against major free-floating developed economy currencies is over. The Euro is 50% overvalued, Sterling is 28%. There is not a lot of upside to that trade from here. On the other hand, the Asian and Middle East currency pegs are at some risk of busting wide open. The Asians and Middle East have held their currencies way too low for way too long. Inflation is rife in these countries as a result. It is only a matter of time before new pegs are found or a currency basket is used to replace the dollar peg. For China, the timing will be critical as their currency is significantly undervalued and protectionist sentiment in the U.S. is sure to mount as the slowdown takes hold.
On the whole, the U.S. Dollar should continue to be weak. But, weakness should come at the expense of Asia and the Middle East more than Europe.
A weaker dollar?
If we look to the States it’s amazing to see how the shape of the financial landscape has changed since August 2007. Rates plunged from 5.25% to zero, the fiscal deficit went up from 2% to 13%, mortgage rates went down to 4.50% from 6.5%, the FED balance expanded from 850 billion USD to 2 trillion USD and we can go on.
David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the US dollar. “It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest - even if it may not be in everyone’s best interest - to sanction a US dollar devaluation as a means to stimulate the domestic economy,” he said.
Why is there no devaluation?
It ‘s called deflation. The D-word is a bad thing for owners of debts. They have to run for the hills and in doing so they’re looking for dollars to pay off everything which is dollar denominated. Another support is coming from the fact that different entities are still forced to show appetite for dollar assets. If they let the buck slip, the value of their dollar assets will be hurt.
Sphere: Related Content
David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the US dollar. “It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest - even if it may not be in everyone’s best interest - to sanction a US dollar devaluation as a means to stimulate the domestic economy,” he said.
Why is there no devaluation?
It ‘s called deflation. The D-word is a bad thing for owners of debts. They have to run for the hills and in doing so they’re looking for dollars to pay off everything which is dollar denominated. Another support is coming from the fact that different entities are still forced to show appetite for dollar assets. If they let the buck slip, the value of their dollar assets will be hurt.
Thursday, 18 June 2009
The reflation trade in reverse?
Is the reflation trade coming to an end?
This trade started back in March and while we’re approaching the end of the second quarter aka first semester, everything is becoming heavy.
The trade was simple: sell dollars, sell govvies, buy every other asset class. .
But we observe that the hottest stuff is already rolling over. The major indexes still hold, but it seems to be just a matter of time.
Would this mean that what went down, will come up again?
As there are: a stronger dollar and higher prices for US Treasuries?
And also lower commodity prices and the emerging markets losing steam?
One thing is for sure: the economy seems to stabilize, but it’s only a rebuilding of inventory. With raising unemployment, the consumer is trapped and no way he’s able to obtain this is through savings. Or better: less consumption.
Sphere: Related Content
This trade started back in March and while we’re approaching the end of the second quarter aka first semester, everything is becoming heavy.
The trade was simple: sell dollars, sell govvies, buy every other asset class. .
But we observe that the hottest stuff is already rolling over. The major indexes still hold, but it seems to be just a matter of time.
Would this mean that what went down, will come up again?
As there are: a stronger dollar and higher prices for US Treasuries?
And also lower commodity prices and the emerging markets losing steam?
One thing is for sure: the economy seems to stabilize, but it’s only a rebuilding of inventory. With raising unemployment, the consumer is trapped and no way he’s able to obtain this is through savings. Or better: less consumption.
Thursday, 11 June 2009
Bond yields
Long term interest rates are going higher. Not only in the States where a 30-year Treasury auction is waiting for buyers, but also elsewhere central banks have no control over their long term stuff.
However, this is a critical point in order to manage all the billions of money which is pumped in the financial system.
10 year GILTS went today over the 4%.
However, this is a critical point in order to manage all the billions of money which is pumped in the financial system.
10 year GILTS went today over the 4%.
Yesterday the US auctioned 10-years Treasury which also went over the 4% in order to lure investors. This offering was one of the many and aimed to raise 65 bln USD this week.
Investors have become increasingly worried that an economic revival could be stalled if this trend continues.
That’s what we call the perfect excuse.
Unfortunately we cannot use it if we slip in from the pub after midnight. The lady of the house never believes us.
Wednesday, 10 June 2009
It is not only the weakening dollar...
The crude oil futures are now over 71 USD/barrel. All papers are claiming following reasons: the weakening dollar, the buying panic of hedgers and airlines and the lower than expected inventories in the States.
Not only the dollar is here the culprit, as the price of crude is also in EUR rising. It's all part of the game where the unwinding of the contango is raking huge profits for all those players who bought oil a couple of monts ago in the spot market and sold it forward.
Sphere: Related Content
Tuesday, 2 June 2009
Silver shines
There goes gold.
And silver. Is it the weakening dollar or the buying of hedge funds?
Difficult to say, but we have to mention that the 1000 USD/oz barrier is coming in sight again.
But silver is the real high flyer.
And silver. Is it the weakening dollar or the buying of hedge funds?
Difficult to say, but we have to mention that the 1000 USD/oz barrier is coming in sight again.
But silver is the real high flyer.
Sphere: Related Content
Monday, 25 May 2009
The dollar is sailing south
Related they all are: the dollar, interest rates and the commodities. Of course we’re hoping that for gold this will be the big one, but then the dollar has to go down further (which I don’t believe) or gold needs to rise as a stand alone.
We believe we still are in a disinflationary environment, so the dollar will not run too far and the FED will cough up more QE by buying up bonds.
If the dollar continues to decline, how are specific asset classes reacting? What’s the historical correlation to the dollar of the 10 sectors within the S&P500.
From David Rosenberg:
We believe we still are in a disinflationary environment, so the dollar will not run too far and the FED will cough up more QE by buying up bonds.
If the dollar continues to decline, how are specific asset classes reacting? What’s the historical correlation to the dollar of the 10 sectors within the S&P500.
From David Rosenberg:
• Basic materials 87% inverse correlation
• Consumer staples 79% inverse correlation
• Industrials 62% inverse correlation
• Consumer discretionary 34% inverse correlation
• Utilities 28% inverse correlation
• Financials 22% inverse correlation
• Health care 18% inverse correlation
• Tech 5% positive correlation
•Telecom 13% positive correlation
Friday, 22 May 2009
Gold shines
It started.
The rumor mill. If the UK can lose the triple A status, why not the States?
It started.
As venom it’s spreading. The dollar is sliding. Central Banks are sneaky selling their Treasuries. Ben will have to announce much more QE.
The de-leveraging continues.
And it looks uglier by the day.
A part of Europe was enjoying a holiday, yesterday. Next Monday the States are not in. A light Friday. As it is all week. Volume is light. Dollar weakness is met with strength of oil and gold.
The strength in the gold price is met with a good performance of the goldminers. The ratio between those two is favoring the latter. This is a good sign for the ongoing rally.
The rumor mill. If the UK can lose the triple A status, why not the States?
It started.
As venom it’s spreading. The dollar is sliding. Central Banks are sneaky selling their Treasuries. Ben will have to announce much more QE.
The de-leveraging continues.
And it looks uglier by the day.
A part of Europe was enjoying a holiday, yesterday. Next Monday the States are not in. A light Friday. As it is all week. Volume is light. Dollar weakness is met with strength of oil and gold.
The strength in the gold price is met with a good performance of the goldminers. The ratio between those two is favoring the latter. This is a good sign for the ongoing rally.
Monday, 18 May 2009
The Liquidity Paradox
The inverted liquidity pyramid is a concept coming from Independent Strategy and illustrating the different levels of liquidity. Important to remember is that central banks cannot impact – or failed– on the most important layer: the top. The liquidity destruction in that department is still going on and no adequate instruments exist to stop this. As financial authorities never regulated these markets and risk appetite could flourish unbounded, nobody has an answer nor a solution ready to stop the liquidity implosion. These markets came to a practical standstill 18 months ago: no more prices, no more trades, the financial desert… and there seems no cure for the moment.
Not good at all…
Sphere: Related Content
Not good at all…
Sphere: Related Content
Friday, 15 May 2009
EUR/USD
There is a technical event in the FX-markets. For the first time since 2005 the EUR/USD is moving above its 200 day moving average. Will the dollar lose more the coming months? Those caught long on the dollar will become quite nervous.
Hey boys and girls out there, it was another eventful week: time to close shop and to go down to the pub for a good pint of Guinness. Cheers to everybody and enjoy your weekend.
Sphere: Related Content
Tuesday, 7 April 2009
Observations
The Bank of England announces swap arrangement to provide liquidity to US Federal Reserve. That was announced yesterday. Strange move, as everybody thought that the almighty FED was saving the world. Apparently they need every penny they can find.
The official explanation: the FED lends these currencies to US-based banks to meet foreign currency needs.
Is this news causing the dollar short squeeze, this morning in Europe?
Another funny thing: the trailing multiple on reported S&P500 earnings is now 100x times. I remember that even on the top of the tech-boom the NASDAQ multiple was only the half. The implosion of profits is causing much more havoc than everybody want to know.
But the bulls are out. The AAII survey shows that the share of bullish investors expanded from 18.9% to 42.7%. We were here before. Right: in January. When the other bull market faded away.
De US Securities Exchange Commission is considering four proposals to restrict short selling. The restoration of the uptick rule is one of them. Others are the ‘bid test’ and a ‘circuit breaker’.
And then there is Larry Summers. The man attires a lot of attention these days, especially his paychecks.
We always liked the guys at www.contraryinvestor.com. They show you charts which tell you more than 1000 words.
Look to this:
The official explanation: the FED lends these currencies to US-based banks to meet foreign currency needs.
Is this news causing the dollar short squeeze, this morning in Europe?
Another funny thing: the trailing multiple on reported S&P500 earnings is now 100x times. I remember that even on the top of the tech-boom the NASDAQ multiple was only the half. The implosion of profits is causing much more havoc than everybody want to know.
But the bulls are out. The AAII survey shows that the share of bullish investors expanded from 18.9% to 42.7%. We were here before. Right: in January. When the other bull market faded away.
De US Securities Exchange Commission is considering four proposals to restrict short selling. The restoration of the uptick rule is one of them. Others are the ‘bid test’ and a ‘circuit breaker’.
And then there is Larry Summers. The man attires a lot of attention these days, especially his paychecks.
We always liked the guys at www.contraryinvestor.com. They show you charts which tell you more than 1000 words.
Look to this:
Jesse writes:
The Obama Administration is scrambling to obtain relief from Europe and Asia, getting them to inflate their own currencies through 'stimulus,' in order to continue to hide the unalterable truth - the US must partially default on its debt as expressed in the dollar.
Thursday, 19 March 2009
Friday, 13 March 2009
The buck stops here
March 13 (Bloomberg) -- China wants the U.S. government to “ensure the safety” of its investments in the world’s largest economy, Premier Wen Jiabao said.
“We have lent a huge amount of money to the United States,” Wen said today at a press conference in Beijing that marked the closure of the annual National People’s Congress meeting. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried.”
Well Wen, we’re worried too.
“We have lent a huge amount of money to the United States,” Wen said today at a press conference in Beijing that marked the closure of the annual National People’s Congress meeting. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried.”
Well Wen, we’re worried too.
And not a little bit.
So you’re not alone.
Did you see the dollar, Wen?
The daily chart of the dollar index going back shows a notable development.
Not only failed this index to sustain a move above the old top of November 8, but also the 21-day average was broken.
Are we in for a correction?
So you’re not alone.
Did you see the dollar, Wen?
The daily chart of the dollar index going back shows a notable development.
Not only failed this index to sustain a move above the old top of November 8, but also the 21-day average was broken.
Are we in for a correction?
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