Moon Kil Woong

Friday FX View: All Around Dollar Selling

The dollar is doomed with respects to what? Certainly not other currencies as all other rush to madly print money and run massive deficits to keep their currencies in parity and export their recession. Yopu can't blame the US for doing exactly what every other country is or wishes they can do.

Unlike China the US doesn't have the luxury of blatently manipulating their currency exchange rates since it is openly traded.

That being said, the Federal government needs to find a long term solution to its trade imbalance and ceaseless Federal Deficit before it becomes even more apparent the US can not domestically support the US's national and trade deficit and must abide by foreign demands even if they demand 10% interest on Treasury Bonds.

So far foreign creditors haven't yet done this simply because it would either start a massive credit contraction that would dry up all demand which exporters need and/or would lead to a massive depreciation of the US dollar which would bring to the end exporting country's undervalued currency advantage.

As for the US$ relative to commodities they are always a great investment whether when demand picks up again from any recession. This is true whether or not the US $ crashes. It is part of a traditional business cycle.

Those who hype the demise of the dollar and then say I told you so when commodities prices rise when the recession ends are misleading you. The effect will happen independent of their presumed cause.

If the US$ remains heavily funded by outside governments, it's rise and fall will be at the political convenience and benefit of those countries, not any fundamental actions the US does aside by remaining in thrall to their gluttonous appitite for consuming too much and having trading partners that are self interested in how they can always get the upper hand on trade issues. Such an occurance would most likely be abrupt and jarring for everyone involved. Personally I don't see this happening anytime soon (next 10 years) because I don't see how any player benefits unless you're already exdpecting a collapse of international trade (like another world war).

Wednesday FX View: Oh My Darling

So far the EU countries have proven they can't abide by a single constraint they agreed to upon signing the EU charter. Which makes you wonder why the UK didn't join. There seems to be no real constraints to having signed and you get a cool more stable currency than the Pound with pretty colors on it.

Dollar Weakness Is Bullish

Hmmm, look at the man behind the curtains. He is the Fed and he's making a bunch of funny money. Although a weaker currency is good for exports are you sure this is the best way to go about weakening your currency. And how effective will it be against the likes of China that pegs itself to the dollar no matter what it goes to?

All you get is huge inflation and an unwillingness for anyone to ever buy treasuries at a low interest rate again.