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Americans of a certain age may remember their parents returning from trips to Mexico with bags full of goods and tales of the low prices to be had. Canadians of 2011 feel the same way about the U.S., where the falling greenback has put a 20% off sale on items purchased in the States, according to BMO.
The Fed's Real Broad Trade-Weighted Dollar Index drops to 40 year lows. Chart readers have a look - either a trend line has been broken with the next stop zero, or the greenback has hit resistance and is due for a serious bounce.
The pummeling of the U.S. currency continues, the greenback again solidly lower against everything. Of particular note is the aussie, which hit another new record as Foreign Minister Rudd rules out intervention to check his currency's breathtaking rise.
A full-blown risk on day sends the greenback lower against nearly everything. The euro is particularly strong, whipsawing anybody who sold it on Monday as the rising probability of a Greek default became evident. Euro +1.3% at $1.4520.
Stephen Gallo suggests comments from PBOC Gov. Zhou Xiaochuan that Chinese reserves have exceeded a "reasonable" level may be the most important event of the week. Just possibly, authorities are losing patience with efforts to reign in liquidity and are ready to allow the yuan to revalue.
Forget the S&P rating action, says Cullen Roche; the only news that matters today is an FT article that the Fed will soon signal the end of QE. The price action - stocks down, bonds up, dollar up - is exactly what one would expect for the end of the QE trade.
"Buy the buck now, not later," says Thomas Flury of UBS who says the stars are aligned for "short term strength." Among his many reasons are extreme levels of short dollar positions and the possible re-up of a 2004 law that cut taxes for companies repatriating their overseas greenbacks. UUP +0.2%.
Following news its GDP tripped along at a 23.5% Y/Y rate last quarter (double expectations), Singapore (EWS) joins a growing list of countries allowing faster appreciation of domestic currencies to combat inflation. Without central banks' active support, the dollar could be headed lower still. UUP -0.2%.
The PBOC reports China's foreign currency reserves jumping $197B in the 1st quarter to more than $3T. The growth in reserves suggests, despite a 1st quarter trade deficit, China continues to print gobs of yuan to buy up greenbacks. The G-20 gathers tonight in D.C.
Speaking in Japan, FRBNY President Dudley quashes thoughts of tightening monetary policy with so much slack in the economy. Possibly getting a dig in at the ECB, he warns headline inflation will get a boost from oil prices, but hiking rates because of that would be a policy mistake. No iPad mentions today.
"A giant ponzi" scheme is former PBOC advisor Yu Yongding's description of the U.S. Treasury market, who contends the Fed is the only thing standing between current bond prices and reality. Letting the yuan float would lessen the need for China to purchase U.S. debt, says Mr Yu.
With QEII making the Fed the marginal buyer of Treasuries, its ending means Bernanke will soon have to hike interest rates in order to attract real money buyers, says Don Coxe. This will put strain on a financial system unable to handle it. Commodities will benefit, as will the loonie, "the new Swiss franc."
It's another wave of green across the commodity sector, with gold hitting a new record, silver crossing $40/oz, and WTI crude threatening $112/barrel. No particular news, but the greenback sinking across the board has something to do with it. Premarket:UUP -0.5%.
Not being left out of the commodity currency party, the aussie is up sharply, hitting an all-time high of $104.34; FXA +0.8%. The flipside of these currency rallies - the dollar is getting beat with the ugly stick, UUP -0.5%, hitting the low point since its creation. UDN +0.4%.
One reason for the dollar's mild, repeat, mild bid this morning: the South Korean, Indonesian, and Malaysian central banks intervened last night, selling domestic currency and buying greenbacks. The move is seen as an attempt to only slow their currencies' strength, not reverse it.