Global Currencies Rally Against the US Dollar

Well… I’ve spent a lot of time this week talking about the rise in Treasury yields… Apparently the rise in yields wasn’t confined to Treasuries, as municipal bonds are getting whacked too… I saw that my friend and former colleague, David Galland, had this to say about the problems with the municipal bonds…

“The problem is state debt. New York, California and Illinois look more like Greece to their bondholders every day.”

Hmmm, isn’t that the stuff I was telling you a year ago? But it’s taken a year for the municipal bondholders to realize it?

Well, any old way, the rise in Treasury yields took a pause for the cause yesterday, gaining back some ground with the 10-year yield falling to 3.20% from 3.23%… Maybe the FOMC was in doing their dirty work with quantitative easing… And then maybe, the rise in bond yields was too far, too fast…

So… With the selling in Treasuries taking a pause, gold was able to gain back some lost ground, rallying back to $1,390.00… And… The euro (EUR) was able to rally back to above the 1.32 handle, after falling through it briefly yesterday morning. The euro led the currencies higher throughout the day, but has given a little back this morning as France and Italy posted manufacturing numbers that were below expectations. I do believe that the Eurozone will continue to come under attack by the markets until the Eurozone members all agree and sing from the same song sheet on a rescue plan… I’ve said this before, and I’ll probably say it a few more times, but for the Eurozone to work through times like this, they need a coordinated monetary policy… Yes, I know, it takes away each Eurozone country’s central bank, but Shoot Rudy, who needs them? They have one currency; they should have one monetary and fiscal policy!

OK… Well… Recall a week or so ago, I told you about Brazil’s soaring inflation, and said that the central bank was dragging its feet to raise interest rates because of the fear of investment flows into Brazil, to take advantage of the higher interest rates, would drive the real (BRL) higher, and that the Brazilian Central bank has an axe to grind with a stronger real… Well… I do believe that the Brazilian Central Bank (BCB) is going to have to raise rates soon… Last night, Brazil posted a stronger-than-expected third quarter GDP growing 0.5% from the second quarter, and 6.7% annualized.

I truly believe that Brazil’s economy is smoking, and should be dealt a higher interest rate to cool its heels before things get out of hand, and the economy overheats…

Aussie (AUD) and Canadian dollars (CAD) are adding to their small rally yesterday, with both only about a cent away from parity with the US dollar once again… Even the New Zealand dollar/kiwi (NZD) saw a reversal of its recent downward move, as traders try to get past the dovish statement by Reserve Bank of New Zealand (RBNZ) Governor Bollard.

You know… I’ve said this before… But I just don’t like RBNZ Governor Bollard, as a central banker… (I don’t know him personally!) He’s no Don Brash, that’s for sure! Governor Bollard disses kiwi any chance he gets, and I just don’t see that as being prudent… A strong currency should be the goal of any country’s central bank… And that’s all I’ll say about that, otherwise I would begin to talk about how the US Fed/Cartel/Bernank has watched the value of the dollar slide down the slippery slope for almost 100 years now… OH! I went ahead and said it!

China saw their trade surplus numbers last night, and brother, were they cooking with gas! China’s exports rose 34.4% versus November last year! I’m sure there were some gnashing of teeth in Washington DC when China’s trade figures were released… And I’m sure the calls for more trade sanctions will begin to show up on the TV once the boys in DC wake up this morning… But if I were the Chinese, I would respond to those calls for trade sanctions with a comment like: Chinese exports face a gloomy outlook next year, with increased pressure from the appreciation of the renminbi (CNY) and trade frictions… So, leave us alone, and we’ll take care of this ourselves…

Maybe the Chinese would want to hire me as a publicist? HAHAHAHAHAHAHA! Now that would be funny; I don’t care who you are!

OH! And China raised their bank reserve requirements last night, showing once more that they are working at cooling their economy the right way…

While we’re in Asia… Japan printed their November Business Sentiment Index for Large Manufacturers and saw it fall to a negative level for the first time since June 2009. The index fell from 13.3 to -8.0… Now, that certainly looks to me like Business Sentiment in Japan just fell off a cliff! But get this… The Japanese yen (JPY) rallied overnight… That’s crazy, folks… And just goes to show you that Japanese traders are a different breed…

Well… The US will print their Trade Balance for October, and their November Monthly Budget Statement today. Both will be HUGE numbers that will be difficult to swallow for the Treasury and Cartel/Bernank… But, they’ll get through it, by printing more dollars… The more the merrier, eh? NOT! At least not in this case!

The U. of Michigan Consumer Confidence for the first two weeks of December will also print this morning… Amazing enough, it is forecast to show confidence rising… I sure wish I knew what those being surveyed that feel so confident were drinking…

Then there was this… So… I’ve heard quite a few claims lately about what the extension of the tax cuts will do for our economy…

Now, I might not be the sharpest tool in the shed, but apparently, I’m sharper than those making claims that the tax cut extensions will cure all that ails us… You see, the key word here is “extension”…

Now… I learned many years ago, that an initial tax cut, or new tax cut, could increase the tax receipts of a country, and spur the economy. (Of course, government spending cuts also needed to happen to keep government deficits from growing!) But, what we’re doing now isn’t “new” or “initial”… It is simply extending what we already have.

When someone gets a new tax cut, they immediately experience “found money”, and the propensity to spend goes up! What we’re doing now isn’t going to help… Yes, maybe a short blip from those that already stopped spending ahead of the previously planned end of the Bush tax cuts… But, that’s it… That’s all… Thank you for playing, there’s a nice parting gift for you at the door!

And then there was this… So… If you think Big Ben Bernanke’s lip was quivering on 60 Minutes the other night, imagine what it was doing when he heard yesterday that Ron Paul, the only Congressman who understands sound monetary policy, was named the Chairman of the House Financial Services Committee, which puts him directly in line to put significant pressure on the Fed/Cartel/Bernank… It was Ron Paul who pushed for a full audit of the Fed… And it was the same Ron Paul who authored a book called Fire the Fed… I’m sure that the “audit the Fed” bill will get some sharper teeth in the next go around… And I for one am glad to see this, because the Fed/Cartel/Bernank has gotten too big for their britches… They have more power over the US economy than any other institution, but it’s not audited? Something has to change… And I believe that Ron Paul is the man to bring about that change…

To recap… The rise in Treasury yields took a pause for the cause yesterday, and that allowed the currencies and precious metals to rebound a bit. That rebound carried over to the Asian and European trading sessions, where the euro met up with some soft manufacturing data from France and Italy. That has put a cap on the euro’s rise this morning. Brazil posted a better-than-expected third quarter GDP, proving once again that the BCB needs to get off their duffs and hike rates!

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

Be the first to comment

Leave a Reply

Your email address will not be published.


*