Wednesday, December 2, 2009

"Dollar: not dead, just smells funny" (DXY)

EUR/USD $1.5052. The spot U.S. Dollar index is at 74.45, up about 1/10% on the day.
Definitely in the running for 'Headline of the Day', from Mineweb:
BCA Research expects the trade weighted greenback to fall to fresh lows.

Over the past year, with the possible exception of the Kazakhstan tenge, the dollar ranks as the world's worst performing currency, among 50 used around the world, and that includes the Icelandic krone, which two years ago looked like it would disappear under an island of ice. Currency volatility is the global order of the day, creating uncertainties everywhere, turning planning and budgeting exercises into epic headaches. On the bright side, the beleagured greenback is universally good for dollar commodity prices, as the same commodities fall in other currency denominations.

For some currencies, appreciation over the past year has been startling; those that have risen by 40% to 50% against the dollar include the Brazilian real, Australian dollar, South African rand, New Zealand dollar, Polish zloty and Hungarian forint. As a rule, so-called commodity currencies have led the pack, but big currencies such as the Euro and Yen have also shone, and like many others, are trading at or close to multi month highs. Even the Russian ruble, drowning in a crisis less than a year ago, has appreciated by 25%.

Rising dollar commodity prices, generally from low points in the early stages of this year, are now seen by some commentators as possibly running into bubble territory, as, effectively, a one-way bet against the dollar. Dollar gold bullion, for one, has made fresh all time records within the past 24 hours, at more than US$1,200 an ounce. Commodities enjoy broader support, as reflected in the majority of world stocks exchanges trading at or close to the highest levels this year.

For speculators on the dollar commodity price train, the ceiling is yet to be reached, according to analysts at the Bank Credit Analyst, which reckon that "the dollar is not technically oversold and fundamental factors for a bottom are still not in place". Seen over the longer term, the dollar index recorded a bull market from 1995 through 2001. It has been in a protracted bear market since, but at current levels, is above multi year lows seen in April 2008, when it measured 70.70 points, the lowest since inception in 1973.


Cyclical high


31 January 2002

Cyclical low


16 March 2008





From high


From 12 month high


BCA Research argues that neither the technical nor the fundamental outlook suggests a turning point is at hand vis-à-vis the dollar....MORE
[that first sentence is a keeper too -ed]