There is sentiment out there that the dollar is to reverse vs. the euro. With so much money being pumped into the system, how can this be?
Anyone care to explain? Thanks.
Rally is due to relative weakness of other currencies as they cut rates and the dollar becomes relatively stronger....this is a short term effect imho lasting perhaps until end of 2009. we may also see a short Obama rally this week ......imho.
The Dollar is rallying because the Japanese and Europeans are taking the same actions the Fed took weeks ago that caused the Dollar to drop. It isn't so much the Dollar increasing in value as the other currencies dropping in value, that is causing the rally. Long-term I'm not excited, but for a short-term trade I like DXDBX purchased at the close tomorrow (it's a 2.5x bull market mutual fund) assuming the Dollar rally continues tomorrow. That will probably get you in around $38.00 per share, and I'd look to sell it around $44.00. Not a bad return on what figures to be a couple of week investment.
There are two drivers for dollar strength. 1. interest rate differential vis a vis other majors 2.Demand for the currency.
The demand for the currency is the main driver for strength at least until the federal deficit is financed.
the dollar is the only thing I want to short now, as there will be plenty of them coming to market for a long time a big over supply that will eventually chase a limited supply of real estate, precious metals, commodities and stocks all going up
The best way i can explain it is we are printing money and giving it to the banks but the money is not being used becuase banks are not lending. So if this money just stays there we are not going to see any inflation only when banks start lending again are we going to see prices of every thing moving higher. And don't forget the rest of the world is printing as well bringing intrest down near 0 injecting money so we are all in this together not just the US
the liquidity currently sitting in bank balance sheets was not "printed" it was borrowed by selling treasuries. It is there to keep some banks from falling below minimums and others to shore up overall solvency and trust of the system. This easy money is so inexpensive the banks have no motivation to risk loans. They could lend 10 times what they have on the books but they won't until values drop or inflation hits. The Fed will not be able to continue to sell treasuries (see TBT) and will soon have to print NEW money since no resumption of lending or inflation will hap till they do. So, in late 2009 we can expect the printing presses to slowly crank and by mid 2010 they will be in full force keeping up with the new New Deal from the Obamians. Dollar may have a number of rallies left till we monetize. jmho hge
That money will enter the system sooner or later. It doesn't matter when but we'll get hyperinflation. The Fed thinks it can reduce the excess liquidity in the future but that's BS. It's true the other nations are printing money but are they in debt up to their eyeballs like the U.S.? Remember when Greenspan reduce the fed rate to zero after 9/11? Do you remember what you were paying for a loaf of bread or a gallon of milk back then compared to now? The inflation they caused then will look tame compared to what we'll see down the road when all this money pours into the system. The dollar will be worthless by then and we'll probably be hearing about a new North American currency being proposed similar to the Euro. Can you say 5 bucks for a loaf of bread?