How Low Can the Dollar Go? 42 comments
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Stronger global economic data, except in Japan, spurred international equity prices, but the key story continues to be the collapse of the US Dollar, which is serving to make it easier for global traders to buy stocks and commodities listed or denominated in $USD.
At the close in New York on Thursday, the S&P 500 (1,042.73 -1.41 -0.14%), DJIA (9,605.41 -22.07 -0.23%) and NASDAQ Composite (2,080.90 -3.12 -0.15%) all had a positive session, and the strength was apparent from the opening bell.
The Toronto Exchange Composite (11,253.23 +98.23 +0.88%) and Venture market (1,261.89 +12.40 +0.99%) went off on a different direction on Friday, making large gains on the day.
On Friday, the US Dollar ($USD 76.68 -0.13 -0.17%) reached a low of 76.457 at about 11:00am ET, then clawed its way back almost to being flat on the day, but took its 5th straight daily loss. The $USD closed at 78.77 on Tuesday Sept 2. Not surprising is the fact that $GOLD closed Sept 2 at 955.90, and has now traded up to 1,006.20 (9.70 +0.97% on Friday).
In other currencies, denominated in USD, the Euro (145.69 -0.10 -0.07%), Pound (166.65 +0.09 +0.05%), and Canadian Dollar (92.89 +0.06 +0.06%) closed almost flat on the day, news was released that economic growth in Japan, a major economy, was poorer than expected, causing riskier foreign investments to be returned home. That explains why both the Euro and the Dollar closed down on the day.
How low can the Dollar go? Another question I have been asking is how high can the oil price go? Crude Oil, which had closed up at 72.17 on Thursday, with little fundamental support, was taken down hard on Friday ($WTIC 69.18 -3.09 -4.28%). Although it didn’t happen on the day because of Japan, a lower oil price will support a stronger Dollar.
As reported here Thursday, Treasury Secretary Tim Geithner’s testimony in Congress that the economic crisis is far from over, and the reports of the known glut of oil and natural gas supplies, is likely to put downward pressure on these prices, so the fact $WTIC plunged -$3.09/bbl on Friday was not a surprise.
The US treasury market on Friday was quiet, but bids were showing up except for the 30-year bond. At the close, the US long treasury bond barely budged in price ($USB 121.88 +0.12 +0.10%). Yields on the 30-year (4.175 0.00 0.00%), on the 10 year (3.343 +0.01 +0.03%), and on the 5 year paper (2.288 +0.07 +0.31%) were virtually unchanged. T-bills were still yielding almost zero (0.135 0.00 0.00%), which is only a good thing for the banks.
In US equity market sectors, only the Industrials showed much action (XLI +0.7%), while Financials (XLF -0.6%) was the biggest loser in a day of restrained movement.
Among the industry group performers Friday, the Goldminers ($XAU +1.2%) were up most, but not much, and certainly not reflective of the almost +$10 gain in $GOLD. Semiconductors ($SOX -1.4%) were leaders among the losers.
For the Cara 100 company stocks on Friday, there were two clear winners: Canada’s EnCana (ECA +7.9%) and Russia’s Vimpel-Communications (VIP +4.0%). Down -3.1% each were Best Buy (BBY) and India’s Tata Motors (TTM).
In international equity markets on Friday, prices were higher everywhere except Japan where economic growth data was disappointing. In the Austral-Asian markets: the Nikkei 225 of Japan (10,444.3 -0.66%) dropped, but is still higher than last week’s close. China (2,989.8 +2.22%), buoyed by strong economic growth reports was very strong, while Hong Kong (21,161.4 +0.44%), Australia (4,596.3 +0.50%) and India (16,264.3 +0.29%) made smaller but solid gains.
As for the European stocks, the mood was also bullish. France (3,734.9 +0.78%), Germany (5,624.0 +0.52%) and the UK (5,011.5 +0.48%) were, like most of Asia-Pacific, higher, but didn’t make any gains in the afternoon.
The gold and silver market was bid higher Friday morning with a stronger Euro, with the spot (cash) market prices as follows for gold (999.80 +0.15 +0.02% 06:28am ET), silver (16.80 -0.01 -0.06% 06:28am ET), platinum (1286 +1 +0.08% 06:06am ET) and palladium (291 +2 +0.69% 06:28am ET). Then as the Euro and Dollar weakened under pressure from the Yen, the prices for gold (from 9:00am ET to 10:00am ET) and platinum (from 9:30am ET to 10:30am ET) soared. This normally happens when the Yen is even weaker than a weak $USD. Spot prices at the close Friday, were for gold (1005.20 +5.55 +0.56%), silver (16.72 -0.09 -0.54%), platinum (1314 +29 +2.26%) and palladium (289.0 0.0 0.00%). Only silver and palladium acted normally during the session on Friday.
In the futures market Friday, the closing prices were for Crude Oil (69.72 -2.55 -3.53%), Euro (1.4592 +0.0009 +0.06%), and DJIA (9592 -13 -0.14%).
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This article has 42 comments:
For the record, Bill Cara knows EVERYTHING about Canada. Prior to launching his trading advisory firm in the Bahamas, he had a lengthy and successful career in business in Canada. Among other things, he was the co-founder and CEO of Qtrade Investors, Canada's leading online broker. And so on. You get the picture.
As for your observations on the Canadian economy, you are absolutely correct. The Canadian dollar certainly has a brighter future than the U.S. dollar. You only need U.S. dollars if you need to buy something from the US. And the U.S. has nothing to sell but debt securities.
There's a good reason for the Fed and Treasury constantly saying they aren't going to monetize the debt: Because that's exactly what they're going to do. They have to. There's no alternative.
REG CROWDER - www.RegCrowder.com
it says nothing!!
Johnathan Vrozos
Canadians were scammed and tax $billions to buy once foriegn oil companies.Petro Canada was 100% owned by Canadians now--0% and Sunico 9%. Went back to Americains--10 cents to the dollar. Still Canadians are saddled with the oil buyouts--GST
Speaking of Canada's dollar, can someone please reply,why Canada buck drops/dorment,as along with the American dollar and saving bank interest rates are .047%? Why is Canada dollar a mess as USA,if it produces more than it needs ? Come to Canada and feel inflation
:^)
Please avoid melodrama. The dollar has not collapsed. It has hovered around $1.40 to the Euro during most of the year. It is now $1.45. That's not a collapse. :)
In fact, not long ago it was $1.60 to the Euro. I remember it quite well because I was living in Paris and ended up paying $9 for a cappucinno.
Keep perspective. Keep the ideological prism in your pocket.
On Sep 12 04:43 PM Mad Hedge Fund Trader wrote:
> iivn Hedge fund longs have been bunching up in the Canadian dollar
> for the past two months. Canada makes what everyone wants and doesn’t
> have enough people to consume it, making them a major exporter of
> everything hot. I bet you didn’t know that the frozen wasteland to
> the North is our largest foreign oil supplier. Most people guess
> Saudi Arabia. The Canadian supply is slated to double over the next
> 20 years, thanks to the environmental atrocity of oil sands. The
> land of Mike Myers, Jim Carey, and Pamela Anderson (note gratuitous
> photo below) is also a big supplier of gold, silver, lead, grain,
> uranium, wood, and other hard things. As for mosquitoes, they’ve
> got a lock on the market. Use dip to accumulate the loony. If you
> catch me singing “O Canada” in the shower, you’ll understand why.
It is inevitable due to our decision (I don't remember voting, but I own a foreign car, so I guess that's a vote) to integrate within the world economy.
US labor is being repriced, and politicians are spending money like mad to shelter labor from the truth. Things won't get better for most private sector people until foreign wages go up, or until we decline further, in the name of "competition." Even privileged civil "servants" will start to feel the sting, but most of them are protected.
It's a sad state of affairs. Americans without jobs and prospects will not be good Americans. We should cut off the oil imports, and limit the junk we buy from Asia. Our favored political class, in Washington and the states, are incapable of solving this as they pursue their own self-interest.
It's Rome, redux. The collapse of a dedicated citizenry caused by imports and a corrupt ruling class. Until its final days, most Romans still thought they were living in a "republic."
The businesses you cite may be successful -- but that is in spite of a single payer health insurance system, not because of it.
On Sep 13 10:39 AM Sunnsea wrote:
> you forgot Blackberries, small jet liners, Bombardier transit cars....and
> now the relocation of a Toyota plant from California to BC. See
> what a single payer national health insurance system will get you?
> Instead of paying extortion money to private health insurance you
> can take the savings and put it to useful manufacturing.
>
> On Sep 12 04:43 PM Mad Hedge Fund Trader wrote:
I find a bit of humor, though. The politically "progressive" Cara appears to want Obama's economic policies to fail so his readers can profit from his predictions.
Joined at the hip with "el Rushbo'?
did you actually get paid for that drivel? i can cut and paste articles that would put that rubbish to shame.
a BIG THANK YOU for the dollar range.
your parents sure wasted their money on your education!
UNBELIEVEABLE!!!!
total waste
my brother is an american living in canada with the canadian health system. he had to wait 5 months for an mri of his knee when it would have taken a few weeks in the states.
Euro has failed to even recover more than 65% of it's total losses in almost 10 months from the last bottom of 1.23. While the plunge from 1.605 to 1.23 took only 5 months to accomplish. That is a 2:1 time ratio in favor of the initial impulsive run to be sustained which is to the downside that makes it a high probability trade to short the euro dollar.
Technically, Euro has more than 65% probability of going down further. And just by using conventional technical analysis; Euro would be headed toward parity level with the US$ by early next year assuming that the second downturn takes more or less the same time as the initial plunge.
Since the Euro$ is the major counterparty to the US$, it is the primary force that had practically dictated on the day by day, week by week, and month by month, where the dollar was headed in the past and where it would be in the future.
Using the monthly chart of UUP or the ETF for the US$; UUP has also consolidated much of the gains from it's rally of July to Nov 2008 without breaking the bottom of $22. That is a very healthy sign of further upsides when UUP failed to break the bottom after going ups and downs for 10 months and should be headed toward $28 next year from the current level of $22.74.
That is where UUP is headed using simple technical analysis or conventional technical analysis with more than 65% probability.
That is where I am making my bet = on the 65% probability of success rather than the 35% probability of failure.
Will then the dollar be low?
Roman artifacts will outlast ours because they did NOT use steel reinforcing... lol
On Sep 13 11:44 AM opinionated wrote:
> What a single payer system for health insurance will get you is long
> and often very painful waiting times for essential healthcare, not
> to mention outrageous levels of personal taxation.
>
*****
Some countries I lived in with public health care system are actually very efficient, I didn't even need to make appoint to see a doctor. I think it’s all come down to how the whole system and regulations been set. Here in US my boss pays $15,000/yr for my health insurance. I rather pay a higher tax for a public care and keep the 15k in my pocket, it saves me money, guaranteed I won’t be dropped out when I’m ill, and probably saves some lives of poor people who cannot afford current insurance. Oh yeah, and I won’t hear the news again about some insurance company CEOs getting a 500million bonus (from companies actually producing nothing but rejecting claims).
Will then the dollar be low?
Roman artifacts will outlast ours because they did NOT use steel reinforcing... lol
Anyways what do you guys think about the possibility of hyperinflation since it appears that we will not "do" the industrial thing again to make up for it (the trillions of thin air money).
And all this on September 11th.. Someones playing games here...
I think the market dives
Tuesday will seal the deal
This is interesting.. Written at the end of August.
www.scribd.com/doc/189...
On Sep 12 08:23 PM a793aa wrote:
> Lookout Tuesday. PPI & CPI data out.
On Sep 13 01:41 AM captainmoonlight wrote:
> Sorry, I came here for some predictions and real analysis of the
> dollar's performance. I should have known I'd find the same crap
> you read in any old rag. So disappointing to see people being paid
> too much money just to regurgitate alot of diassociated market statistics
> and draw tenuous, oxymoronics links to support a banal conclusion.
> Please stop wasting my time by using headlines without substance!
www.rollingstone.com/p...
> misleading title for sure.
>
> my brother is an american living in canada with the canadian health
> system. he had to wait 5 months for an mri of his knee when it would
> have taken a few weeks in the states.
My son is a Canadian living in Canada and he had to wait 6 days for an MRI of his torn up knee. I had to wait 22 hours for an MRI of my back, but in that instance I had the weight of the national Unemployment Insurance monster pushing to get me healed and off their books at the earliest convenience.
But I concede, it does take longer to get some of the specialized services in Canada... sometimes (but not always) it can be half as long as Americans think it takes us.
> Have you seen the Rolling Stone article????
>
> www.rollingstone.com/p...
Yes, I saw Matt Taibbi interviewed on BNN in Canada. His report is fabulous... very revealing and honest. No doubt Sachs is peesed off at him, but he's a type of guy who doesn't care. He'd rather speak the truth than cower at the feet of the banking oligarchs. He's a breath of fresh healthy air... a fabulous read.
But that's not going to happen because the Japanese CB as well as other export-driven economies CB's (Germany, China, and other Asean Group exporters) upon looking over the precipice of continued falling exports (to the US) and unacceptable high unemployment, will intervene and buy up Treasury notes (thereby increasing exchange rates and strenghtening the USD) just to raise the buying power of US consumers which will raise their level of exports and keep people employed. It's a matter of politics and survival; and you can bet on it.
Just remember, the US consumer generates some 16% of global trade; if the Dollar remains weak and US consumers cut back on their buying (which has already happened) the economies of nations that export to the US are likewise affected. So given the choice of sitting on USD reserves and watching their employment rolls dramatically fall and pople on the streets demanding jobs and bailouts to pay mortgages, foreign governements will buy up US T Bills at low rates to keep the economy humming.
Conversely, the US government is delighted with a weak dollar as a natural barrier for US consumers to buy US goods rather than foreign goods. So the US is really in the catbird seat with a win win scenario going forward.
this also apply to america son.
soon, you may find out that there other countries in the planet with potential and growing, internal market buying power.
now,
lets not be foolish, 1.3 billion chinese, 200 million brazilians and 1.1 billion indians will not become middle class(and start buying) overnight, just like china will not dump USD overnight.
so, for sure, I DO BELIEVE USD HAS A SHORT TERM REBOUND.
but look beyond, 20 years from now, maybe, in a multi-polarized world, US may not be the center of everything. no doubt, it wont lose its status as a super power, however, no longer a mega-power.
On Sep 14 05:38 AM globalview99 wrote:
> The so-called fall of the Dollar is a head fake sucking in easy money
> who think that because of the huge deficits, the US will need to
> ratchet up interest rates to attract foreign purchases of US debt.
>
>
> But that's not going to happen because the Japanese CB as well as
> other export-driven economies CB's (Germany, China, and other Asean
> Group exporters) upon looking over the precipice of continued falling
> exports (to the US) and unacceptable high unemployment, will intervene
> and buy up Treasury notes (thereby increasing exchange rates and
> strenghtening the USD) just to raise the buying power of US consumers
> which will raise their level of exports and keep people employed.
> It's a matter of politics and survival; and you can bet on it.<br/>
>
> Just remember, the US consumer generates some 16% of global trade;
> if the Dollar remains weak and US consumers cut back on their buying
> (which has already happened) the economies of nations that export
> to the US are likewise affected. So given the choice of sitting
> on USD reserves and watching their employment rolls dramatically
> fall and pople on the streets demanding jobs and bailouts to pay
> mortgages, foreign governements will buy up US T Bills at low rates
> to keep the economy humming.
>
> Conversely, the US government is delighted with a weak dollar as
> a natural barrier for US consumers to buy US goods rather than foreign
> goods. So the US is really in the catbird seat with a win win scenario
> going forward.
On Sep 12 04:43 PM Mad Hedge Fund Trader wrote:
> iivn Hedge fund longs have been bunching up in the Canadian dollar
> for the past two months. Canada makes what everyone wants and doesn’t
> have enough people to consume it, making them a major exporter of
> everything hot. I bet you didn’t know that the frozen wasteland to
> the North is our largest foreign oil supplier. Most people guess
> Saudi Arabia. The Canadian supply is slated to double over the next
> 20 years, thanks to the environmental atrocity of oil sands. The
> land of Mike Myers, Jim Carey, and Pamela Anderson (note gratuitous
> photo below) is also a big supplier of gold, silver, lead, grain,
> uranium, wood, and other hard things. As for mosquitoes, they’ve
> got a lock on the market. Use dip to accumulate the loony. If you
> catch me singing “O Canada” in the shower, you’ll understand why.
An excellent resource for gleaning the trend and the daily update to this concept is the chart at the bottom of the KITCO home page. Here are put in relation not just the daily price swings in gold but the concurrent swings in major currencies as well. Gold advances and retraces at different percentages as against different currencies.
Some other themes that may benefit are for example a SLS the vertical chart with it's portfolio of INTERNATIONAL REITs strongly !under! weighting US REITs. The NGZ the global convertible securities fund only 17% US weighted. The EWC and EWS two ETFs that are sector funds in two countries with very strong banking systems and central banks that are eschewing "Q" easing. IAF the Aussie dollar theme. EWM the Malaysian thing also with huge resources both mineral and agricultural. LAQ for the Latin American exposure with the same theme. CRESY and SQM in Ags. VWDRY & BRPFF in Alt energy. BPR in oil.Etc Etc.
On Sep 14 10:08 AM Delojozafado wrote:
> Pinky locks on your post. Perhaps one of the best ways to play the
> Loonie however is to own those things you mentioned. The BAM owns
> majority interests in both BRPFF and ATBUF. While the pure cap and
> trade play BRPFF was yielding over 8%/9.4%BWT when it sold last Jan
> and FEb for under $13.00 US Pe$os it now is a strong $16. Lumber
> futures sliding below $1.70 make the ATBUF a REIT play, a Fuel oil
> alternative for the Northeast of North America as they not only do
> pulp, forestry nurseries, OSB, and the usual lumber products as well
> as pulp, they also produce cord wood and wood pellets for heating.
> The real estate holdings are very significant as against the Unit
> price. Either of these would be great additions to portfolios on
> a market swoon. Meanwhile the BTE, along with the STO (Noky hard
> Currency) &SSL (Randy Hard currency) can be traded (bought)on
> moves in the black gold below $65. These are then sold in 60-80%
> of the position lots as against oil rallies above $75. SCO is then
> a place to park if you are not too risk averse back down to below
> $67/BBL. While "IT" has already started. The seasonal strength in
> gas in the ANTICIPATION of the heating season has gone on for a
> few weeks now. This morning 9/14 Gas once again getting a strong
> bid under it illustrates... A nice 20 cent move higher as against
> most all other commodities falling off. Here I have recently been
> rewarded with additions of Daylight DAYYF and Paramount PMGYF. These
> have great EFFECTIVE distributions well over 9%. Are near 100% Gas
> E&P CANROYs. They have both accomplished acquisitions as of
> late DAYYF taking down two as of late and just now grabbing High
> Pine Beetle Energy the OIL E&P entity. The PVX and PGH may in
> fact be as good but maybe not in as sound in their financials. I
> am also mugging up on Bell Aliant (seekingalpha.com/symbo...
> the VZ "FIOS" of the Maritimes outbuilding of broad band and their
> very loyal narcissistic cell phone customer base. With these strong
> dividend plays you get a leverage to owning the FXC. The EWC is
> of course a great ETF as is the from worst to first ENY. Very interesting
> chart on the GACHF. Of course there may even be place to buy Teck
> Commie. The SXRZF has made a quad as against it's 10/28/08 low,
> as uranium is mentioned.Meanwhile I still believe in the SQM for
> it's lithium exposure over the Lonnie guano. As for grains how about
> a 3 week chart of that CRESY . EH?