Bernanke and the Bears

Includes: CYB, UDN, UUP
by: Global Investing Editor

The attack bears surrounding Ben Bernanke are not serious currency forecasters. They are a bunch of Tea-Party Fed-haters, Republicans hoping that gridlock will sustain the Great Contraction long enough to defeat Obama in 2012, Chinese trying to deflect criticism of their weak renminbi by yelling about US policy, and Germans trying to deflect criticism of their smug unhelpfulness to fellow-Europeans over the risks of the common currency.

However, since I went long the greenback on Nov. 4, the dollar has risen, fed by continued euro bailouts and the Chinese need to tackle inflation. This has hurt the euro and commodity currencies like the C$ and the A$ and boosted the US$.

According to Bloomberg, “strategist forecasts for the dollar to weaken have all but ceased.” The news service yesterday said that its most recent survey of 38 analysts show they expect the dollar to strenghten to euros 1.36 by the next year, from 1.3673 now.

Bloomberg cited analysts with “a good record” at Wells Fargo (NYSE:WFC) as being more bullish on the US currency, expected it to be worth 1.38 euros by year end.

China is seriously worried about the price of food leading to social unrest. Beijing's food focus led China Daily News to write today: “Road tolls for vehicles carrying fresh produce will be scrapped from December 1, and local authorities will have to ensure energy and transport prices for fertilizer producers are reduced.” CDN is the main state media mouthpiece.