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The removal of the word "vigilance" from Trichet's opening statement this morning and a nod to Geithner/Bernanke talking up the dollar was more than a signal the ECB was going to pause its rate hikes, says Steve Liesman. It could be the ECB is waiting for the Fed to make the next rate move. FXE -2.0%.
Seeking to further diversify from the greenback, South Korea considers investing a portion of its more than $300B in foreign currency reserves (7th largest on the planet) in yuan-denominated securities. U.S. securities currently make up about 64% of SK's stash.
Business is booming at FiREapps, where CEO Wolfgang Koester says U.S. firms are clamoring to hedge against dollar weakness. Jeff Macke notes companies getting swept up in this sort of worry could mark the sign of a market extreme - witness airlines' rush to hedge near the top of the 2008 oil mania.
Seeking an outlet for FX reserves other than U.S. Treasuries, Asian policymakers meeting in Hanoi discuss setting up a fund to invest in needed infrastructure. More than a decade after the Asian contagion, these countries have built up $6T in reserves, half of that belonging to China.
A roundup of economists' reactions to the killing of Osama bin Laden ranges from effects on the dollar and gold to an overall lowering of equity risk premiums and beyond. Ed Yardeni: "My sense is that most fully invested bears would turn into outright bulls if fiscal discipline were to make a comeback in the U.S. and if John Wayne were back in the saddle again."
A falling dollar brings handles not recently seen or never seen before vs. major currencies. The euro climbs to $1.49 for the first time since 2009, now within sight of pre-GFC levels. The aussie punches through $1.10, never even having hit $1.03 just six weeks ago.
"Our economy is far from where we would like it to be," says Fed chief Bernanke at a conference about the challenges facing lower/moderate income communities. Gold likes what it hears, now surging 2% to $1,562/oz. The dollar plumbs fresh 30-month lows.
Despite the usual rhetoric about the desire for a strong currency, U.S. officials seem unconcerned with the weakening greenback. The current decline in the dollar isn't out of line with 3 of its other recent bear markets. The only problem is 2 of those 3 moves ended with major financial panics.
The greenback falls to another record low vs. the swiss franc after SNB chief Hildebrand says current expansionary Swiss monetary policy poses a risk to price stability. Having waved goodbye to parity shortly after QEII began, the dollar now buys CHF0.8655. FXF +22.5% Y/Y.
A check on the greenback shows a tiny bounce from sharply lower overnight trading, but still near multi-year lows against most major currencies. Of note are all-time lows vs. the swiss franc and the aussie. Also, the euro breaks through $1.48 for the first time since late 2009. UUP -0.2%.
Gradual appreciation of Asian currencies should ease inflation pressures in the region, says Eisuke Sakakibara. Known as "Mr. Yen" back in the day for his ability to move currency markets, Sakakibara isn't convinced the U.S. will see the last of QE at the end of June. Related ETF: AYT.
As the press conference wraps, markets take up where they left off before 2:15, with shares and commodities at or near highs. The dollar is plumbing new lows. Of particular note is the aussie, threatening $1.09, never having been above $1.04 as recently as a month ago. FXA +0.8%, UUP -0.4%.
The key to the FOMC statement, and an all-clear signal to those who would sell greenbacks, may be that there were no dissenting votes after a number of recent comments from Charles Plosser and Richard Fisher indicated their discomfort with current monetary policy.
With 2 year yields near the bottom of a multi-month range and its measure of euro long sentiment at its highest level since December, Citi says investors are clearly leaning towards a dovish Fed statement. Anything other than that could see a reversal in recent price trends.
FX markets yawn as Treasury Sec. Geithner defends the greenback, saying "we will never embrace a strategy to weaken the dollar ... our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country."