The Dollar Holds On to the Hammer Overnight

The dollar held the hammer over the non-dollar currencies yesterday, although the usual suspects of Aussie (AUD), Canada (CAD), kiwi (NZD) and Norway (NOK) didn’t really lose that much ground… The real weakness has been seen in the three majors… Euro (EUR), yen (JPY) and sterling (GBP)…

There was a report that the Fed Reserve issued yesterday reminding banks to manage their interest rate risk, that reminded the markets that banks do have interest rate risk, and sparked a flood of “safe haven” buying in the dollar… Funny that a stupid report from the guys who fueled all this mess, would create “safe haven” trades in the dollar… I just don’t see why that happens… I know all the reasons why people feel that the dollar is a “safe haven” but, in reality, did that turn out to be true in the last financial meltdown?

Recall that there was this HUGE deleveraging of risk assets like currencies and commodities, and “safe haven” buying of dollars to buy Treasuries… I’ve told you many times before how that “safe haven” trade didn’t exactly work out that way, with the dollar returning to its weak dollar trend, and Treasury yields going from 2% to 3.85%, which means a price loss! But… Don’t let that fact get in the way of more so-called “safe haven” buying!

Today is a Jobs Jamboree Friday… Snuck up on you, eh? It snuck up on me… There’s a story on the Bloomie this morning titled: “US Payrolls May Have Stopped Falling As Economy Strengthened”… Now, wouldn’t that be nice, if we could wake up, when the day was new… No wait… Wouldn’t that be nice…

I’m afraid it would be lies, to make us feel good… Besides, it was December… How many people lose their jobs in December? The month is short, filled with good will, and so on… So, yes, we could actually see the job losses stop in December, the first time in two years that we wouldn’t see job losses… But will it be a true indicator that the jobs problem has bottomed?

And, what, part will the Bureau of Labor Statistics (BLS) play in this report? We all know that they get their hands into every labor report and “massage” it…

OK… Yesterday, there was news all over the TV and internet about the NY Fed and AIG… According to the report, the NY Fed pressured AIG to keep their payments to brokerages like Goldman Sachs, a secret from the public… Now, doesn’t that just tick you off? OH! And guess who was running the NY Fed at the time of these alleged deals to defraud the public? Why, it’s Mr. Timothy Geithner, that’s who! Is there any thing that this guys touches that’s not a fuster?

The NY Fed is denying these findings… But, there’s smoke here, folks… And it’s thick smoke! And it goes along with all the other things I keep talking about regarding the government getting more involved in our personal lives… I’m sure, that Tim Geithner thought it to be “best” to not tell the public that the they were giving tax payer gillions to AIG, and AIG was turning it around and giving it to Goldman Sachs and others… And the excuse would be along the lines of: These are extraordinary times, and they call for extraordinary measures to save the world…

I’m going to stop there on that… This is a Friday, and I like to be upbeat and ready for the weekend… Everybody’s working for the weekend…

Gold has found it difficult to add to its gains earlier in the week, instead it has seen some profit taking, and outright selling. It’s down $9 this morning… The shiny metal is still well above the $1,100 level… Of which… I believe is the new line in the sand, and dips below that level should be looked at as buying opportunities… But, that’s just my opinion, I could be wrong of course…

There is a lot of talk going ‘round that centers on the emerging markets, and the prospects for rosy returns from these emerging markets in 2010… So, I thought I would touch on this… Countries like: Poland, Hungary, Czech Republic, Brazil, South Korea, Mexico, South Africa, India, China, and there’s more…

Basically, as I’ve explained to you many times in the past, These emerging markets currencies tend to trade in packs… So, if something bad happens in say, Mexico, then the rest of the emerging markets get tarred with the same brush… But… If it’s all seashells and balloons for the emerging markets, like it has been so far this year (5 days, Chuck, come on!) then they all get bought…

To that end, the emerging markets co-head at PIMCO, sent out a report yesterday saying that Poland, Mexico and South Korea are his picks for 2010… Well… I like Poland best of those three, and have since 2003, when I wrote the piece about how Poland, Hungary and the Czech Republic were on the “fast track” to euro acceptance… Unfortunately, that “fast track” had a detour, and other countries moved to euro acceptance before the “three amigos”… Finland, Greece are two that moved ahead of the three amigos… Of course, right now, the European Union and European Central Bank probably wishes they had never accepted Greece…

After the comments by the Japanese Finance Minister the night before, last night saw comments left and right trying to calm the markets down… Prime Minister, Hatoyama, chastised the Finance Minister, by saying that the government should not comment on FX, and added that the Finance Minister’s currency views reflected business sentiment only… Then, as you might guess if you follow Japanese politics… The Finance Minister conceded that “currencies undoubtedly should be determined by markets”

So… One day imminent Japanese intervention was on the table… And the next day it was removed… But one thing is clear here, folks… The Japanese want the yen weaker, they just don’t want to see wild swings…

This has just got to get under the skin of US officials, who know in their heart of hearts that they need a cheaper dollar, but their two largest trading partners have designs on keeping their currency weak…

Remember how both Chris and yours truly, pointed out to you that Commercial Real Estate was the next shoe to drop on the mortgage business? Check out this that Reuters posted… “Commercial mortgages delinquent 30 days or more shot up to 6.07% last month in the US, the highest rate since commercial mortgage-backed securities were first market.”

Oh My! This is going to get really ugly, folks…

Then there was this… This NY Fed/Geithner/AIG-thing is really interesting… It really ticks me off… But the thing that I find to be the most important to take out of this, because we can’t do anything to reverse what’s been done, is to realize that the Gov’t will stop at nothing to pull the wool over our eyes… My good friend, David Galland put it this way… “Of course, what’s actually important in all of this is the confirmation – as if we needed it – that high government officials are willing to take active measures to keep the public in the dark on matters that would be inconvenient if revealed.”

Back to me… So… If the government was good with doing this to us… You can see where I’ve had my suspicions about the data reports they give to us… About the PPT… About the “Caribbean Treasury buyers”… And so on…

To recap… The dollar holds on to the hammer overnight and early in European sessions. The 3 majors see most of the damage, euro, yen and sterling… Gold has sold off $9 overnight and this morning, and it’s a Jobs Jamboree Friday, with no job losses for December expected… I would have to say that if that’s what’s expected then the BLS will make certain that that’s what you get!

About Chuck Butler 105 Articles

Affiliation: EverBank

Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter.

With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News, World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune.

Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.

Visit: EverBank

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