In December, we had better than expected NFP and the UE drop to 10% from 10.2%. The currency markets believed that this would make the Fed raise rates sooner than expected and the long end of the yield curve saw rates increase almost 65 basis points. This led to a strong US dollar rally against most major currencies. This rally faltered at the end of the month in December. As we headed into January, the expectation was for a positive NFP and it actually was -85k. This led to a sell off in the US dollar and we have retraced … …READ MORE
Tag Archives: US dollar
Why Politics Matters For the US Dollar
As a reformed currency trader, I often can asked why I spend my time following what happens in politics. Does the resignation of Sen. Dodd really matter? Why should we care if Congress fights over health care or regulatory reform? What difference does it make if there’s an estate tax or not? These are all questions that seem to have very little on the surface to do with currencies and the value of the dollar.
The best answer to all of this is that it all matters. Since the 1930s and the seismic shift of US governmental intervention into the … …READ MORE
Double the CNBC Fun Today!
Today at 11:10 AM ET, I’ll be appearing on CNBC’s the Call with Larry Kudlow discussing the outlook for China’s economy. Then I’ll be back at 11:40 to discuss how geopolitics will impact the US dollar in 2010.… …READ MORE
Droppin' the Option
Senate Majority Leader Harry Reid said that they are close to getting “broad agreement” for health care reform. Reid says they have a plan to replace the “Public Option” component with a new national insurance plan offered by private insurers, and a chance for older Americans to “buy in” to Medicare according to Politico. The CBO still needs to score the changes to see if this new overall structure delivers what the Democrats want for reform, inclusion, and cost savings.
Remember, the reason why the United States is engaged in health care reform was to change the trajectory of the … …READ MORE
US Health Care Bill a Concern for the Chinese
Over the weekend, China’s chief banking regulator sharply criticized the US Federal Reserve and the monetary policy of the United States. Liu Mingkan said that the U.S. Federal Reserve’s promise to keep U.S. interest rates at extraordinarily low levels for an extended period “has already led to a massive U.S. dollar carry trade and massive speculation.” He said that the weak U.S. dollar and low U.S. interest rates are creating “unavoidable risks for the recovery of the global economy, especially emerging economies” and that the situation is “seriously impacting global asset prices and encouraging speculation in stock and property markets” … …READ MORE
Posted in Front Page Also tagged Chinese yuan, health care bill, OMB, President Obama Leave a comment
China Trade War Coming
New Zealand PM English says US dollar likely to decline further, says he discussed US dollar with US Tsy Sec Geithner, says Asian countries should not be worried about FX appreciation, but says he’s concerned about the strength of his own currency and it’s impact on NZ exports.
Thailand Finance Minister Chatikavanij says they have bought $15 bln in 2009 to slow US dollar descent, says China stressed APEC need to ensure no rise in protectionism, says no indication from China if or when a yuan revaluation will take place, and says weak yuan forces Asian central banks to curb … …READ MORE
Obama Focus on Far East
US Treasury Secretary Tim Geithner has been hitting the air waves and the editorial page during his trip to the APEC conference in Singapore. From Bloomberg to CNBC, Geithner has been consistent in stating that it’s very important the US maintain a strong dollar. However, he is advocating the opposite for the Asia-Pacific nations.
In an editorial in the Asian WSJ with the finance ministers of Indonesia and Singapore, Geithner said. “Market-oriented exchange rates in line with economic fundamentals will be essential in assuring the resource and sectoral shifts to match and foster the new patterns of demand.” Clearly, they … …READ MORE
G20 Affirms Weak $
Over the weekend, the US dollar was pummeled as it fell against almost every major currency and every minor currency except one. Hmm, which one would that be? Before we get to that, let’s run through the top seven reasons the greenback got whacked.
1. IMF report saying $ overvalued.
2. G20 no mention of US dollar in statement
3. G20 no stimulus exit.
4. China warns US to reduce deficit.
5. US House passes HC bill that expands deficit $1.1 trillion.
6. India to exit stimulus.
7. Better than expected German IP at +2.7% ve 1.0%.
All of these … …READ MORE
Currencies and Exit Strategies
Here’s a quick back of the envelope list of countries and whether the currency’s strength will be a problem to engage in reducing monetary stimulus.
1. Australia: no problem
2. New Zealand: no problem
3. Canada: a problem
4. Brazil: a problem
5. China: no problem
6. UK: no problem
7. EZ: no problem
8. US: no problem……but no exit.
Brazil and Canada are clearly the poster children for currency strength duress as both those nations made it clear they are not happy with the situation yesterday. After the government denied on Friday then announced on Monday a tax on … …READ MORE
Posted in Front Page Also tagged Ben Bernanke, health care, Tim Geithner, US deficit Leave a comment
Australia Leads Where the Fed Needs To Go
Today in a somewhat surprise move, the Reserve Bank of Australia raised interest rates 25 basis points to 3.25%. The RBA becomes the first G20 central bank to officially begin an exit strategy from monetary easing to stem the global financial crisis. They had previously cut rates a record 425 basis points. RBA Governor Stevens said, “The risk of serious economic contraction has passed.”
Australia didn’t experience a contraction to the extent that Western countries have and is fortunately tied to economic stimulus in China. However, this tie comes at a cost as the massive Chinese loan stimulus has bled … …READ MORE
