Dollar Index Drops…
August 20, 2013 · by Chuck Butler
Good day… And a Tom Terrific Tuesday to you! A good late inning win for my Cardinals last night… Of course I was fast asleep and didn’t see it, having to resort to reading about it this morning. There are a few things to talk about today, most of it is going to sound as though Chuck is venting, but keep in mind that I’m reporting stories… I don’t make this stuff up folks… Well, I take that back, sometimes I do, when I go into my conspiracy theories but I at least tell you that’s what it is up front!
To start the day, I have to stop and send out a great big Happy Birthday to my darling daughter, Dawn… Dawn is beginning to add the years, but still looks like she could pass for a teenager! So Happy Birthday Dawn… (I put this in the 2nd paragraph, because most days she only reads the first and last paragraph!)
The euro is stronger again this morning, and looks as though it will take out 1.34 soon enough… The Aussie dollar is down 1/2-cent this morning, and the Chinese renminbi is weaker in the daily fixing… In fact most of the currencies, other than euro, Swiss francs, and pound sterling are down VS the dollar this morning. The A$ has lost so much ground overnight on markets’ feelings about what the Reserve Bank of Australia (RBA) was saying in their meeting minutes that printed last night. In the minutes, I read nothing that shouted out to me that more rate cuts were coming, but the markets did, and that’s all that counts, folks… The markets felt as though the RBA left the door wide open, not just cracked open for more rate cuts…
I really had thought that the A$ had steered clear of more selling from rate cut expectations, given the react of the A$ after the last rate cut a couple of weeks ago. Remember that one? The A$ actually rallied after the rate cut announcement, thus leaving me to believe the rate cut was priced in… I guess that’s what the markets are doing now, selling the rumor and maybe buying the fact later….
The Norwegian krone is weaker this morning on the news that 2nd QTR GDP was weaker than expected, thus allowing the rate cut campers to come out of the woodwork once again. Norwegian 2nd QTR GDP printed negative (-.2%) VS the forecast (+.7%)… This makes the 3rd consecutive report that missed the expectations on the downside in Norway… Now, what will the Riksbank do? They’ve got a housing bubble going on, but economic growth continues to slow… I say don’t give in to the “cut rates to promote growth crowd”… You have a housing bubble, you need to steer the country out of that and you won’t do it with lower rates… Lower rates will only throw gas on the fire…
The Japanese yen is pretty much flat today, neither gaining or losing to the dollar.. I find this to be interesting given just how much I’m of the belief that yen should be much, much weaker… I even saw a headline on the Bloomberg this morning that talked about yen being a “safe haven” once again… I doubt that to be the case, but then stranger things have happened in currencies, eh?
Speaking of strange things in currencies… I see that the Dollar Index is down this morning, but when I look at the currency screens I see mostly currencies losing ground to the dollar, so what gives? Ahhh grasshopper, as I’ve told you many times in the past, the Dollar Index is NOT the best way to track the dollar’s performance, as the Index is so heavily weighted with euros… But the Index is what the markets use and refer to all the time, so, we have to too!
Gold was weaker when I first turned on the screens this morning, following up yesterday’s weak performance, but… Since I came in, Gold has made up lost ground overnight, and is flat on the day at $1,365.65… The price of Oil dropped $1 from yesterday’s levels in today’s trading so far. The price of Oil has been up and down a lot in recent months, mostly up… The goings on in Egypt aren’t helping us at the gas pump, but that’s not what I really worry about… I worry about an escalation of problems, as if there aren’t enough already in the Middle East.
Gold has now turned positive on the morning, so at least the trend is your friend here… I read a story yesterday on MarketWatch, regarding a writer that is a Gold bear, but has found that he now likes Gold and understands the reasons that the so-called Gold Bugs believe that Gold should be higher… It was an interesting read that I shared with the desk… ( I should quiz them this morning to see if they actually did their homework! HA!) Reminded me of my own insight into the reality of Gold, my own Epiphany if you will… It came a long time ago folks, but still, there was a time that I didn’t see the forest from the trees with Gold…
Yesterday, I told you that the Indian rupee had fallen to another all-time record low… Well, wipe that previous low off the board, because the rupee has posted another all-time record low overnight. I did an interview with Pimm Fox from Bloomberg radio last Friday, and it was called, “Around the World with EverBank”… WOW! Pretty impressive, eh? Well, the first week, we talked about India, and we talked about all the reasons why the Indian rupee is so weak, but then I also talked about the new Central Bank Gov. and highlighted his plans to promote growth… It’s not about now, folks, it’s about what will be done to change things… You have to change things when something’s not working, and something’s not working right now in India… That’s why I like the country going forward, that is, IF the new Central Bank Gov. can change things… I have a sidebar on India that applies to all countries in the For What It’s Worth section today…
So many people asked me last week in San Francisco, what I was thinking putting Emerging Markets Currencies in a new CD when the Emerging Markets are getting hammered since Big Ben first muttered talk of ending QE.. Well, I said, “ First of all, you have 100% principal protection, and 2nd, this is a 5-year CD, I would like to think that it’s possible that these Emerging Markets rebound in the next couple of years, and 3rd, what great levels to buy into, all-time record lows? Talk about “buying low, selling high” well, you have the first part of that equation down! And then finally, everyone hates the Emerging Markets right now, and reminds me a lot of the euro when it was first introduced, remember that?
The single unit was issued at 1.14, and immediately rose to 1.17, and almost as fast, it turned down, and kept falling until it reached .82-cents… Everyone hated it then… And I was about to issue my white paper titled, The Decline of the Dollar… Which was followed the next year by “The year of the euro” OK, I’m not saying that the Emerging Markets Currencies will turn out just like the euro, all I’m saying is that it reminds me of that time, and how much the euro was hated…
The U.S. 10-year Treasury gained back a little ground yesterday, after falling to 2.87% on Monday morning, the 10-year recovered to 2.82%… Still, quite the fall from last week! U.S. stocks fell to a 5-week low yesterday, thus giving some love back to Treasuries… I was finding it very interesting that the once so-called “safe haven” Treasuries were getting sold while Emerging Markets were getting sold too… One would have thought that if the Emerging Markets were getting sold, that the flight would be to a safe haven… Well, maybe it was… Gold… It certainly wasn’t Treasuries!
Tomorrow the Fed’s FOMC Meeting Minutes will print, and the markets are wishing, and hoping and thinking and praying that the Fed Head throw them a bone… I don’t think the minutes will give them anything they don’t already know, but then we are talking about the Fed Heads… I have to smile when I say Fed Heads, it’s like they are a boy band… Of course we all know that they aren’t all males… The Fed Heads sounds like a boy band… like One Direction… (the new one, for all of you who are trying to think of boy bands names like: Hanson, The Jonas Bros, All-4-One, and who could forget the New Kids on the Block, or N-Sync! ) (OK, I actually cheated and looked these up, because I wouldn’t know one if it hit me in the nose!)
The New Zealand dollar / kiwi has lost a bit of ground overnight on some news from the Reserve Bank of New Zealand (RBNZ) Gov. Graeme Wheeler… Now we all know that Wheeler has stepped right into the boots of former RBNZ Gov. Bollard, and kept the dissing of kiwi at the top of his agenda… And once again kiwi gets handed the load of dookie from the Central Bank… Last night, Wheeler made an announcement that rather than hike interest rates to combat a housing boom going on in New Zealand, he would instead implement lending restrictions that will limit the ability by lenders to lend money… He then went on to say that he feels that kiwi is seriously over-valued… Have I told you how much I dislike the RBNZ Gov. lately? Where is Don Brash when kiwi needs him?
The euro just hit 1.34, but has dropped off again… I find this so interesting, given all the talk of ending QE… And before I head to the Big Finish, let me point out that this has been a “Taper Free Zone” today… not mention of you know what by me… and I find that to be refreshing don’t you?
For What It’s Worth… I had someone send me this article that was posted on www.firstpost.com and talks about the new Central Bank Gov. Rajan… The writer, Mr. Nagasundaram, makes a point about interest rates in the article that I think should apply to most countries and their Central Banks… especially the Fed… here goes…
“But as I wrote in my previous piece, the part of our economy that is in dire need of “zero regulation” is the monetary system. Raghuram Rajan can start with deregulating interest rates. After all, the interest rate is the price of money – the point at which the quantity demanded from borrowers is equal to the quantity supplied by savers. Much as you do not want governments to set the price of cars or movie tickets, you do not want governments setting the price of money also. Not only am I talking about short-term interest rates, but also the ongoing and blatant manipulation of long-term interest rates through our own version of quantitative easing. Interest rates serve a very important function of coordinating investment and consumption decisions and any manipulation of the same has unwelcome consequences.”
Chuck again… yes, he’s talking about Gov’t setting rates, and here the Gov’t isn’t supposed to have any influence on the Fed Reserve… I’m choking when I say that, so I’ll try it again… The Gov’t isn’t supposed to have any influence on the Fed Reserve… OK, I got that one out without choking, but my eye is watering so badly right now, I can’t see to type! I think you get the picture, and what I’m getting at here… To me, the markets should set interest rates, period.
And I’m sure that there are plenty of disagreement with that statement, but you won’t change my mind in venting with me, so, let’s move along, for these are not the droids we’re looking for…
To Recap… The dollar has recovered against most currencies this morning, except the euro, Swiss franc and pound sterling. Yen and Sing $’s are flat… Gold has turned the red numbers earlier this morning into green as I write. Indian rupees drop to another all-time record low, and is about has hated as the euro once was… The markets believe they read something in the RBA’s meeting minutes that caused them to push A$’s down, and RBNZ Gov. Wheeler did his best imitation of former RBNZ Gov. Bollard, and dissed kiwi, causing the currency to have a huge drop overnight.
Currencies today 8/20/13… American Style: A$ .9070, kiwi .7985, C$ .9640, euro 1.3390, sterling 1.5665, Swiss $1.0860, … European Style: rand 10.1695, krone 5.9735, SEK 6.4990, forint 224.15, zloty 3.1640, koruna 19.2540, RUB 32.97, yen 97.25, sing 1.2760, HKD 7.7545, INR 63.53, China 6.1697, pesos 13.04, BRL 2.4120, Dollar Index 81.02, Oil $106.15, 10-year 2.82%, Silver $22.87, Platinum $1,510.35, Palladium $749.90, and Gold… $1,365.15
That’s it for today… I remember the day that my little Dawnieboo was born, she had a full head of coal black hair, just like her grandpa… Her hair turned blonde by the time she turned 1… So, Happy Birthday Dawnieboo! Sharing Dawn’s birthday, is our little Christine’s oldest son Jameson, so Happy Birthday to Jameson too! I have an interview on the Street.com this Thursday we’ll do the video shoot right here in our office. Our Tech guru, Nicki, is great at taking care of everything, so that all I have to do is sit down, put the earplug in and start talking! Good thing I’m here alone, I had to stop and sing along with Stevie Wonder’s song, My Cherie Amour… I just saw a commercial on the TV that was an ad for a couch potato’s dream… glasses that you wear and they stream the TV on the lenses, so you can just lay there and not even have to turn your head to watch TV… Talk about crazy, lazy! Oh well… I doubt I will sign up for them, I don’t lay on the couch! HA! Go Cardinals! And I hope you have a Tom Terrific Tuesday!
EverBank World Markets
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