Sunday, July 06, 2008

The shifting of Currencies

The U.S. employment number was basically as expected and caused little reaction in the markets. The "Big" mover of markets was the ECB rate rise, which was expected, but not the dovish comments coming from Trichet afterwards. The Dovish comments caused the dollar to strengthen quite a bit and for Euribors to move from 10(ish) down to up more the 25bp. I cannot believe that Trichet thinks a "one and done" approach is the correct way to go, but rather maybe some pressure from Washington and the rest of the world to talk Dovish in an attempt to strengthen the dollar. Right now I see no reason for the dollar to strengthen. The U.S. economy is struggling at best and inflation by any reasonable measure is way to high. I think that the Central Bankers understand that a strong dollar helps everyone out (well almost everyone) and that they do not want to see it make new lows.


It seems that on Friday that the Argentine Lower House Passed the Grain Export-Tax Plan that President Cristina Fernandez de Kirchner put forth on March 11. There are a few adjustment to attempt to calm the Farmers but I am not sure it will be enough. I think this could lead to real trouble moving forward in Argentina. Look for the spot to weaken and interest rate differentials to move out (neither of which suit my positions). To read more CLICK HERE.


I do not comment on Korea very often but the currency has been hit by large volitity of late. The Central Bank has been intervening both in Asia time and New York in an effort to prevent the further weakening Won. It has done little except to give speculator's better levels to short the currency. As long as the U.s. economy is weak and Crude hover at new highs the Won will suffer as will most of Asia.

Good Luck and Good Currency Trading



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