sharetrader
Page 1 of 3 123 LastLast
Results 1 to 10 of 24
  1. #1
    Junior Member
    Join Date
    Apr 2007
    Location
    , , New Zealand.
    Posts
    17

    Question US Dollar - why up?

    Hi everyone - I also asked this question in the Newbies corner but am not sure that was the right section, so if you don't mind I would like your opinion here. Can someone please give me some insight as to why the US dollar would rally in the short to medium term. I can't think of any logical reason in the current climate as to why some of the commentators on CNBC predict this and would love someone to provide a viewpoint. I would have thought with all this printing of money that the dollar would be toast. What would be the logics behind the dollar rallying?

  2. #2
    Senior Member
    Join Date
    Oct 2004
    Location
    , , .
    Posts
    989

    Default

    The USD is still viewed as the safest currency so when world equity markets are declining and risk appetite is low money flows into US treasuries and by default the US dollar strengthens because it is being bought.

    So the situation where the dollar will strengthen will most likely happen when the equity market weakens which in my personal view is about to happen.

  3. #3
    Junior Member
    Join Date
    Apr 2007
    Location
    , , New Zealand.
    Posts
    17

    Default Thank you

    Great explanation. However, how can it be a safe haven when surely to the people it is clear that printing off all this money can only undermine the value of the US dollar. This is where I am struggling. Not all countries are printing money (as yet), so why would one consider the dollar safer?

  4. #4
    Senior Member
    Join Date
    Jul 2007
    Location
    North Shore
    Posts
    1,088

    Default

    Conspiracy theorists would point to the shadow Bretton woods agreement.

    In short, they're high because China and Russia have to buy USDs....and they have to buy even more to protect the value of the stuff they have already bought.
    Disclaimer: Do not take my posts seriously. They are only opinions.

    AMR has sold all shares and is pursuing property.

  5. #5
    Senior Member
    Join Date
    Oct 2004
    Location
    , , .
    Posts
    989

    Default

    Quote Originally Posted by delinky View Post
    Great explanation. However, how can it be a safe haven when surely to the people it is clear that printing off all this money can only undermine the value of the US dollar. This is where I am struggling. Not all countries are printing money (as yet), so why would one consider the dollar safer?
    There are many aspects to fund flows and value is not always the prime consideration when seeking a safe haven. Other factors come into play especially when risk is high chiefly liquidity and low volatilty and usually the usd satisfies those criteria.

  6. #6
    Guru
    Join Date
    Apr 2007
    Location
    Hamilton New Zealand.
    Posts
    4,251

    Default

    Quote Originally Posted by delinky View Post
    Hi everyone - I also asked this question in the Newbies corner but am not sure that was the right section, so if you don't mind I would like your opinion here. Can someone please give me some insight as to why the US dollar would rally in the short to medium term. I can't think of any logical reason in the current climate as to why some of the commentators on CNBC predict this and would love someone to provide a viewpoint. I would have thought with all this printing of money that the dollar would be toast. What would be the logics behind the dollar rallying?
    Delinky...Printing money is only one side of the equation the other side is how much money is evaporating into thin air, a tremendous amount has disappeared with this severe financial crises....so the net overall extra money in the system is difficult to assess at any given point in time. If there is news that the recovery has stalled it means more money has evaporated strengthening the dollar. Also if the global economy is perceived to have suddenly weakened the Companies pull their money back home (USA) causing demand for the Dollar..there are other scenarios too of course... one being China and India buying cheap Commodities (rawmaterials such as copper etc) for stockpiling using accumulated US$, therefore lowering their exposure to the US$ and weakeing the US$ value due to lower demand/oversupply. From the latest warehouse data this activity seemed to have waned of late. ...so this recent upward movement maybe a combination of all sorts of things plus adjustments as the updated economic data comes through for analysis... so like all markets there are ebbs and flows, day by day. With the Dollar in a medium term downtrend I would have a guess and say there is an net positive amount of US$'s in circulation now since 24 April 2009 uptrend break. As money creation provides economic stimulus + a lower $ value to which the FED is happy to have, as a lower $ helps lower the current account deficit and reduce debt I would assume the FED will attempt to keep the US$ low for a while yet. Usually the FED should have no problems holding down the Dollar value as economic change to a recovery mode usually has a lower value currency as one of those indicators. As the US$ is in a medium term decline this is (sorry Dumbass) an early indicator that the economy is reacting to recovery signals to which the Equity markets and commodity markets react favorably to and this has been seen with both of these leading markets having commenced their uptrend at a similar time as the US$ broke its uptrend and confirmed its downtrend. (reverse correlation)

    From my chart (sorry its a little messy) you see the US$ index (blue line) is currently in a short term rally in a medium term downtrend.
    The orange coloured support/resistance lines are of major importance.. If the 78.5 support line is broken it will signal a bear market cycle for this US$ index If it breaks upwards through the 83 resistance line it will confirm that the downtrend is only a bull market correction and the primary uptrend is re-commenced. Most indicators (not shown) are presently bullish however the Bollinger bands (pink/purple lines) are closing together signaling a possible near future change of trend. Note how accurate the Bollinger bands have been in the past.

    My guess (and that is all it is) that this short term rally will peter out and a retest of the 78.5 support line is likely. The longer term chart shows a better picture with the breaking of the 9 month uptrend line (green line) together with a bearish double top ...this doesn't look like a bull chart to me. Hence good news for equities and raw materials (commodities).

    Colin Twiggs has his easy to read chart here with slightly different figures.

    If the US$ index rises above 83 and recommences its uptrend this of course spells bad news for commodity markets including Gold silver and oil and equity markets because theory has it that these markets are inversely correlated at this stage of the economic cycle ( bottom/early recovery stage). This is what Dumbass is assuming and although we use similar techniques it is amazing how we can get different answers... This is what makes investing so intriguing from my point of view.

    With everyday new data is added to these variables..viewpoints forward can change quickly.

    Last edited by Hoop; 19-06-2009 at 12:29 AM.

  7. #7
    Guru Dr_Who's Avatar
    Join Date
    Aug 2007
    Posts
    3,045

    Default

    Here's an interesting question.

    What will happen to the USD if China (HK) depegs their currency to the USD?
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  8. #8
    Guru
    Join Date
    Apr 2007
    Location
    Hamilton New Zealand.
    Posts
    4,251

    Default

    Quote Originally Posted by Dr_Who View Post
    Here's an interesting question.

    What will happen to the USD if China (HK) depegs their currency to the USD?
    My view is... if the USA loses its super power status to other countries (possible scenario some time in the future) then the US $ would cease to be the international trading currency and the new super powered Country's currency takes its place.. and analysts will use that currency as an indicator factor instead.

    The big fish in the small pond behaviour???

    With the growth rate of China far exceeding that of the USA...analysts are forecasting that China's economy will be bigger than USA sometime in the 2020 decade....and the US $ currency debate will intensify as that decade nears.

    The USA seems to be a little uneasy in losing this top dog status (obviously) as other less USA friendly countries are gaining more economic power such as the BRIC group.

    Of interest

    Growth Potential

    Annual Growth rates 2011-2050

    Brazil +4.3%
    Russia +2.8%
    India +6.3%
    China +5.2%

    source : Goldman Sachs

  9. #9
    Junior Member
    Join Date
    Apr 2007
    Location
    , , New Zealand.
    Posts
    17

    Default Wow!!!

    I am so glad I asked the question. You guys are so helpful and have enabled me to see more outside the square. I receive regular info from someone who resides in the US, who has been trading full time for over 25years and following "what really" is going on. He receives insider information and therefore messages to me are a bit cryptic for a newbie (or maybe I just don't understand the jargon), but basically he has been saying for a while now that US dollar is toast, Bonds are absolutely toast, and a war pending very soon and China are in the background buying up many many commodities. Apparently a new currency is inevitable and a lot more going on behind the scenes that the media is not allowed comment on. Hence, my question in the first place because if it really is all doom and gloom I just didn't get why on earth the US dollar will rise at all. Hoop, you put so much time and effort into replying and I so appreciate it. thank you. I am enjoying trading but truthfully am very confused at all the conflicting info out there.

  10. #10
    Observer Kookaburra's Avatar
    Join Date
    Jan 2004
    Location
    No fixed abode
    Posts
    44

    Default

    The presumption that US will lose superpower status to China id probably wrong. I have previous read a very good analysis of why which includes the inherent natural and infrastructure porblems of China. It has a rapidly aging population due to its one child policy. It has a serious shortage of water and natural resources. Much of the country is dessert. It is poorly equipped with ports and river transport. Compared with US it just cannot compared. It is a loose integration of many different cultural groups which could fall apart it conditions deteriorate as may happen with loss of export markets and income.

    Some argue that despite the problems the US is the only currency where we know all the bad news. This is yet to be factored into the Euro and Yuan.

    Credit destruction is destroying money more quickly that the US is printing it. And the quantitive easing it is practising is more credit creation than Zimbabwe type printing.

    On balance I am still confident of the future of the USD and use it as a 'store of wealth' currency.
    Empty kookaburras make the most sound.
    Lessons from a snake-eater

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •