Coelacanth

A Surprise in Store for the Dollar?

What I love about days like today is how no one is paying attention to a rapidly deteriorating situation in the euro-zone.

As Ms. Lien correctly points out.....French, Italian (and Germany) all showed pronounced weakness in their industrial output for May and there is every indication that the euro-zone may have contracted in the 2nd qtr. (As a reminder...the U.S. hasn't experienced negative growth yet).

Too boot, Mr. Trichet has indicated that he is willing to tolerate a flaring up of inflation in the short-term to see it moderate in the medium term (early to mid-09). IMO as the fundamentals continue to deteriorate in the euro-zone, traders will begin to "price-out" further rate increases and the euro will fall in value.

IMO the greenback appreciating against the euro will be less a reflection of dollar strength as much as it will be a reflection of the euro losing value against other currencies.

It's a contrarian play and a bit dicey but I think a trader could make a very good case for shorting EUR/USD from the 1.59 - 1.60 handles.

Good work Ms. Lien.

As Dow Breaks Bear Stearns Low, Euro / Yen Hits High

The EUR/JPY looked ridiculous up there in light of struggling global equities. Seems like ultimately it might gun for 170.00. I might be looking to get short around 169.95 - 170.00 depending on what the ECB does and says next week. If the IFO reads of last week are any indication it looks like the euro-zone is finally cooling off.

Carry traders have had it good for a long time. Yen crosses are looking decidedly wobbly and a rude wake up call may be just around the corner.

A Few Reasons to Buy Yen

Interesting take.

Japan is arguably a deep value investor's dream. They largely avoided buying debt backed by sub-prime loans which means their banks aren't getting hammered like Europe's and ours are. As such, Japanese banks seemed uniquely positioned to take advantage of depressed assets prices worldwide and have picked up their deal making activity.

Their exporting activity to emerging Asia may also buffer them from a larger global economic slow-down.