Asbytec

Picture This: Currency Trends

In my view, the dollar has to strengthen further into 2009. I imagine it's much more difficult to get a read on trends during volatile times. So...

First, as mentioned, the hedge funds will probably continue to pay out in dollars well into next year. What's the estimate on the pay out, $1.7 trillion? The bail out package is less than half that, and much of the bail out might not directed to help hedge funds.

Second, with jammed credit markets, trade is winding down. Less dollars are finding their way into the forex.

Third, the MBS failure is drying up global liquidity, including the dollar, despite Fed liquidity injections. As the dollar disappears, demand for it should increase. Inflation is already projected to fall across the globe.

And, forth, dollar based safe havens do seem to be in demand as the world edges into recession or worse.

I am bullish on the dollar through 2009 and fully realize I may lose my shirt. I just pray I am right.