Monday, March 27, 2017

Currencies: “It is perfectly possible that the week will see yields moderate further and the USD resume its push lower.”

The dollar index (DXY) is down again and brings to mind the comment of one of the greatest stockpickers I've ever known, "A trend is emerging".* From FinViz, two weeks of the hourly chart:

DXY 98.95 down .48%

From FT Alphaville:

Snap AV: Your week in weakening USD
Plenty of USD notes coming in following the healthcare vote debacle, so here are some representative words from Simon Derrick at BoNYMellon as the dollar falls (against the euro, JPY and GBP) and US yields slip… a bit (with our emphasis):
Since the President’s inauguration in January, however, the relative attractiveness of US yields has faded somewhat thanks to a variety of factors including signs that concerns about inflation are quietly on the rise. The implication of this was clear enough: for the USD to resume its rally in a meaningful way (barring something truly radical happening) it would take a serious rise in yields to emerge. Given that the most likely driver of such a shift in yields would be a significant pick-up in economic growth this focused the thinking of investors on how successful the new administration would prove at pushing through promised policy changes. As a result the White House’s ability to steer though the healthcare reform bill took on a far greater significance for the currency markets than might otherwise have been expected. The logic was simple enough: The harder it looked for the Republican leadership to push through the bill then the greater the uncertainty about its ability to deliver on other campaign pledges (2) and, hence, the less the upward pressure on yields.

This thinking made itself increasingly apparent through the course of last week with yields (including those on benchmark 5-year TIPS), gold and the USD moving on the changing expectations around the expected vote of healthcare reform. In line with the USD (as well as US equities) came under pressure late on Friday as it became clear that the bill lacked the votes to pass the House of Representatives....

*Via 2012's "Climateer Line of the Day: A Trend is Emerging Edition (UNG)
...On "A Trend is Emerging" from a 2008 post:

"A trend is emerging."

I'm sorry, private joke. One of the best securities analysts I know said that in 1999 when looking at this chart, minus the last eight years of course, and right before the stock took a sixty percent dumper. At the time, MO was up approximately "1 billion, gagillion, fafillion, shabolubalu million illion yillion..." percent over the prior twenty five years.
Chart forAltria Group Inc. (MO)

Splits: Jun 3, 1974 [2:1], Jun 1, 1979 [2:1], Apr 11, 1986 [2:1], Oct 11, 1989 [4:1], Apr 11, 1997 [3:1]
(that's Dr. Evil's demand [...Yen] in the third movie, about which Wikipedia says "This time his demand is met with simple confusion from the world leaders.")

As I said in a 2010 usage of the phrase:
*The stock is Phillip  Morris (now Altria). The move depicted is 8 cents to $25.06.
$31.42 last. 
Big MO closed at $73.17 on Friday.
900 times on the money, now that's a trend.