Category: U.S. Dollar

The dollar’s meteoric rise may be just about over

19-Mar (MarketWatch) — The U.S. dollar’s eight-month long roller-coaster ride is about to head downhill, analysts at HSBC said Thursday.

Strategists at the British bank have raised their euro forecasts, becoming the first major bank to predict a resurgent euro by the end of next year. They now see the euro rising to $1.10 by the end of next year — and $1.20 by the end of 2017.

That is a contrast with a dour forecast from Goldman Sachs issued just last week. Goldman updated their forecast, saying that they saw the euro hitting parity by September, and falling to 80 cents by year-end 2017.

HSBC’s David Bloom, one of the report’s authors, said that while the rally may have some more room to run, the fundamentals suggest that the market has already priced in easing abroad — and is underestimating the potential impact of slowing domestic growth.

“People are saying we don’t have to worry about data because the central banks are anchored — but currencies aren’t just about interest rate differentials, they’re not just about policy differentials,” Bloom said. “The U.S. economy is surprising to the downside aggressively. Don’t ignore it.”

[source]

Posted in all posts, U.S. Dollar |

High-level China-Germany financial dialogue maps cooperation ahead

18-Mar (Xinhua) — China and Germany conducted their first high-level financial dialogue here on Tuesday and agreed to strengthen macro-economic policy coordination, hold policy dialogue and promote pragmatic cooperation in fiscal and financial areas.

China’s Vice Finance Minister Shi Yaobin told Xinhua that the fruitful results of the First China-Germany High Level Financial Dialogue, which lasted one day, show new highlights of fiscal and financial cooperation as well as future cooperation between the two countries.

…The Chinese official also underlined some of the most noteworthy consensuses reached at the dialogue, including Germany’s support for China’s goal to add its currency renminbi (RMB) to the Special Drawing Rights (SDR) currency basket based on existing criteria.

Germany will also “actively support China in hosting the G20 summit in 2016,” Shi added.

At the dialogue, Germany also announced its intention to join the Asia Infrastructure Investment Bank (AIIB) as a prospective founding member, which was welcomed by China.

…They also supported the establishment and development of an offshore RMB market and a local RMB clearing bank in Frankfurt and welcomed German financial institutions using RMB qualified foreign institutional investors (RQFII) quota to invest in Chinese markets.

…The event marks an important milestone in China-Germany financial cooperation after bilateral endeavor to make Frankfurt a renminbi clearing hub, said Loechel.

[source]

PG View: China and its currency are clearly ascendent, and much of the gains will likely come at the expense of the dollar.

Posted in U.S. Dollar |

This is why the euro is collapsing


13-Mar (WashingtonPost) — The last time the dollar was worth more than the euro was all the way back in December 2002, just three years after the common European currency came into existence. But in the years after that, the Euro gained strength as the continent imported less and exported more. The euro soared to an all-time high of $1.59. It was enough that, in 2007, former Federal Reserve Chair Alan Greenspan wondered if the euro would replace the dollar as the world’s reserve currency–in other words, the benchmark that everyone uses in case of emergency–and even supermodel Gisele Bundchen reportedly insisted on being paid in euros rather than dollars. That’s quite a consensus. But it turns out that these reports of the dollar’s death were greatly exaggerated. Since then, the euro has fallen 24 percent against the dollar in less than a year, and made everyone forget its grand ambitions.

What happened?

Robert Frost can help us here. Two monetary policies have diverged in, well, not a wood, and Europe has finally taken the path well traveled by. Specifically, to boost Europe’s extraordinary weak economy, the European Central Bank is buying bonds with newly-printed money, aka quantitative easing, while the Federal Reserve is far enough along that it’s getting ready to raise rates. That means interest rates are falling, sometimes into negative territory, in Europe, and, at least on the short end, rising in the U.S. Think about it like this. Would you rather buy a German 10-year bond that pays 0.25 percent or a U.S. 10-year bond that pays 2.1 percent? Investors, especially big European ones, are answering that by moving their money out of euros and into dollars. And voilà, the euro has fallen from $1.39 last year to $1.06 today.

[source]

PG View: When you look at a longer term dollar index chart though, the greenback is just past the halfway-back point of the long-term downtrend off the 2001 high. Going back further, the recent rally to 12-year highs is barely a blip within the very-long-term downtrend.

Posted in Currency Wars, U.S. Dollar |

The Strong Dollar Is Weighing On Major U.S. Exporters

12-Mar (Wall Street Journal) — The stronger U.S. dollar has hurt exporters and could dampen their investment plans for next year, top business executives said in a new survey.

The quarterly Duke University/CFO Magazine Global Business Outlook Survey, released Wednesday, polled about 1,000 business executives–mostly CFOs–around the world.

Two out of three big U.S. exporters–those with at least one-fourth of their total sales overseas–said the appreciation of the dollar has had a negative impact on their businesses. And nearly one-fourth of big exporters said they have reduced their capital spending plans as a result.

Executives across many sectors–from construction to manufacturing to healthcare–pointed to the strengthening U.S. dollar against most major currencies as an emerging risk that has developed over the past six months.

We are in a midst of an ugly contest to see whether the eurozone, Japan or Canada can depreciate the most against the U.S. dollar, and China is probably next,” said Campbell R. Harvey, a professor at the Duke Fuqua School of Business and a founding director of the survey. “U.S. exporters are being punished by these competitive depreciations and this will lead to lower profits and less employment.”

• Only 23% of European CFOs believe the European Central Bank’s quantitative easing program will actually increase inflation.

[source]

PG View: I’m surprised they could find 23 out of 100 CFOs that believe QE will work. Japan has been doing it for 15-years and the U.S. and UK have been doing it for more than 6-years without attaining their inflation goals. Why would those CFOs think the ECB is going to have any better luck?

Posted in U.S. Dollar |

White House’s Furman: Strong dollar is a headwind

10-Mar (MarketWatch) — The strong dollar is undoubtedly a headwind for the U.S. economy, said White House chief economist Jason Furman on Tuesday. In a speech at the National Association of Business Economics, Furman said the headwind from the strong dollar was largely counteracted by the lower price of oil. He said the administration was continuing to be vigilant about risks to the economy from overseas. The headwind from the dollar was “another reason” to strengthen the 87% of the domestic economy that is unrelated to exports, Furman said. White House officials don’t often comment on the dollar.

[source]

PG View: Is the White House now exerting pressure on the Fed not to raise rates this year, for fear the headwind will turn into a full-force gale?

Posted in all posts, Economy, U.S. Dollar |

Dollar Loses Hold Over Gold as Greek Drama Fuels Demand

24-Feb (Bloomberg) — Emotion is trumping the dollar in the gold market.

Every quarter for the past three years, the metal has moved in the opposite direction of the currency. That trend is being upended in 2015. Investors have bought bullion as a hedge against political turmoil in Europe, even as the dollar rose on prospects of higher U.S. interest rates. The inverse correlation between the two assets, which in December was the strongest in a year, is now half of its average over the past decade.

The risk of a default by Greece that could unravel the European Union helped fuel demand for gold as a haven and boosted market volatility. While bullion pared some gains this month as Greece negotiated an extension of a bailout package, holdings in exchange-traded funds backed by the metal rebounded from a five-year low in mid-January to the highest since October, even as the Federal Reserve signals its first interest-rate increase since 2006.

“Gold at the moment is being driven by the fear factor — it rises when euro-zone uncertainty increases, and falls when it decreases,” Rene Hochreiter, a mining analyst at Noah Capital Markets (Pty) Ltd., said by phone Tuesday from Johannesburg. “Last year, gold’s fate was much more tightly bound to the dollar and the outlook for quantitative easing, but that trade is no longer the dominant one.”

[source]

Posted in European Debt Crisis, Gold News, Gold Views, U.S. Dollar |

The Dollar Will Die with a Whimper, Not a Bang

by James Rickards
06-Feb (DailyReckoning) — The same force that made the dollar the world’s reserve currency is working to dethrone it.

…But once the sterling lost its lead reserve currency role to the dollar, inflation exploded. The index hit 757.3 by 2005. In other words, during the 255 years of the index, prices increased by 200% in the first 185 years while the sterling was the lead reserve currency, but went up 5,000% in the 70 years that followed.

Price stability seems to be the norm for money with reserve currency status, but once that status is lost, inflation is dominant.

The decline of the dollar as a reserve currency started in 2000 with the advent of the euro and accelerated in 2010 with the beginning of a new currency war. That decline is now being amplified by China’s emergence as a major creditor and gold power. Not to mention the actions of a new anti-dollar alliance consisting of the BRICS, Iran and others. If history is a guide, inflation in U.S. dollar prices will come next.

In his 1925 poem The Hollow Men, T. S. Eliot writes: “This is the way the world ends/ Not with a bang but a whimper.” Those waiting for a sudden, spontaneous collapse of the dollar may be missing out on the dollar’s less dramatic, but equally important slow, steady decline. The dollar collapse has already begun. The time to acquire inflation insurance is now.

[source]

Posted in Currency Wars, U.S. Dollar |

Lew Says Strong Dollar to Be Topic of Talks as G-20 Starts

09-Feb (Bloomberg) — Treasury Secretary Jacob J. Lew said the strength of the dollar will be discussed among Group of 20 finance ministers meeting in Turkey this week and the growing U.S. economy still needs to produce higher wages for workers.

“We’re getting some benefit now from oil prices in terms of the economy getting a bit of a boost on top of that,” Lew said in an interview Sunday in Washington, with excerpts airing Monday on CNBC. “So I’m feeling pretty confident that we’re looking at a good period ahead.”

G-20 officials said in a draft communique that monetary policy needs to stay accommodative to support a pickup in growth, without mentioning currency issues. Lew said the U.S. dollar is “stronger than a lot of the economies that we compete with” and “the real challenge is getting other economies to get back in the growth pattern where they’re doing better,” according to an article on CNBC’s website.

The U.S. still needs “more wage growth that people can really feel,” he said.

[source]

Posted in U.S. Dollar |

The reason a strong dollar is hurting stocks right now

28-Jan (MarketWatch) — The U.S. dollar’s strong rise is getting a lot of the blame for the stock market’s recent weakness, but there’s more to it than a simple inverse relationship between the U.S. currency and equities.

…Lena Komileva, chief economist at G-plus Economics in London, argued in a note back on Jan. 16 that the dollar’s recent performance reflects growing global anxiety.

…“In this context, U.S. dollar strength reflects rising international systemic risk rather than cyclical normalization in global economic conditions,” Komileva said. “The dollar’s rise has become a symbol of the de-globalization of capital and rising credit market distress and financial volatility, rather than a sign of U.S.-led normalization in global yields.”

A stronger dollar is reinforcing “the market’s intense focus on global disinflation, demand shortages and financial default risk,” she said.

[source]

PG View: This goes a long way toward explaining the recent correlation between gold and the greenback.

Posted in Markets, U.S. Dollar |

Dollar Beats All Peers on Fed as Euro Declines to 4 1/2 Year Low

02-Jan (Bloomberg) — The dollar strengthened before reports that may reinforce speculation the Federal Reserve is on course to raise interest rates this year while other central banks extend stimulus measures.

The U.S. currency climbed versus all its 16 major peers in 2014 and extended those gains today. The euro reached a 4 1/2-year low after European Central Bank President Mario Draghi said he can’t exclude the risk of deflation in the currency bloc and signaled that the likelihood of large-scale quantitative easing is increasing. The pound fell after a report showed U.K. manufacturing growth unexpectedly slowed last month.

“We are seeing an extension of ongoing themes,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark. “It’s all about continued improvement in the U.S. and whether that first Fed rate hike is moved forward. Then there’s the anticipation of the ECB launching an easing program.”

[source]

Posted in Markets, U.S. Dollar |

U.S. Dollar Strength Not Likely to Dampen Inflation Much

26-Sep (The Wall Street Journal) — A recent spike in the U.S. dollar is unlikely to put sufficient downward pressure on import prices to have a significant negative effect on inflation, according to researchers at the Federal Reserve Bank of Cleveland.

The U.S. dollar has been on a tear, hitting a four-year high against a basket of major currencies Thursday amid mounting expectations the Federal Reserve will raise interest rates next year while its counterparts in Europe and Japan consider further measures to raise inflation and spur growth.

[source]

Posted in inflation, U.S. Dollar |

The Morning After: What Happens When A Government Destroys Its Currency

02-Sep (ZeroHedge) — Imagine this scene:

“Everyone in the country was in shock. People’s net worth had devalued more than 53% overnight.”

“The value in savings accounts dropped in half and neither merchants nor consumers knew how to react because they had never been through something like it before…”

This is how an American business executive described living through Mexico’s devaluation of the peso exactly 38 years ago on September 1, 1976.

Looking back, it was so obvious.

Mexico had a mounting debt, destructive policies, and a woefully unsustainable fixed exchange rate with the US dollar. All the writing was on the wall.

But most people ignored the warning signs and kept their money in pesos.

Mexican President Luis Echevarria even went out on the radio to reassure people that the currency was safe.

Finally, under intense fiscal pressure, the government reached its breaking point. And on August 31, 1976, they made the decision to devalue the peso.

People woke up the next morning on September 1st to a 50%+ decline.

…Looking back, it’s all going to seem so obvious. If a major, global currency crisis hits within the next 12-months, people will think, “duh, how did I not see that coming?”

Unfortunately by then it will be too late.

It takes only a little foresight and planning to insulate yourself from an event that can have disastrous consequences.

If you knew the Mexican peso was at an unsustainable level, why would anyone continue to hold pesos?

Similarly, if all the objective data suggests that the dollar is in store for an epic decline… and that the entire world is on a path to shift away from the dollar, why in the world would any rational person base his entire life savings in dollars?

[source]

Posted in U.S. Dollar |

The dollar’s 70-year dominance is coming to an end

19-Jul (Telegraph) — In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.

The US was already the world’s commercial powerhouse, having eclipsed the British Empire several decades earlier. America was also on course to be among the victors of “Europe’s conflict”, even though its economy was largely unscathed by war. As such, Bretton Woods was US-dominated and produced a settlement largely on US terms.

Seventy years ago this week, that fateful summit ended. Its close marked the moment the dollar’s unquestionable supremacy was secured. Since then, global commerce has been conducted largely in dollars and leading economies have held the greenback as their primary reserve currency.

…The advantages this system bestows on the US are enormous. “Reserve currency status” generates huge demand for dollars from governments and companies around the world, as they’re needed for reserves and trade. This has allowed successive American administrations to spend far more, year-in year-out, than is raised in tax and export revenue.

…The dollar’s status is a big question. Judging the outcome is more akin to star-gazing than scientific economics. But the establishment of this BRIC Development bank, timed to coincide with the anniversary of Bretton Woods, is an audacious and significant move. The world’s emerging giants now have thumbscrews on the West.

[source]

Posted in U.S. Dollar |

France hits out at dollar dominance in international transactions

07-Jul (Financial Times) — Michel Sapin, the French finance minister, called for a “rebalancing” of the currencies used for global payments, saying the BNP Paribas case should “make us realise the necessity of using a variety of currencies”.

He said, in an interview with the Financial Times on the sidelines of a weekend economics conference: “We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don’t think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade.”

Christophe de Margerie, the chief executive of Total, France’s biggest company by market capitalisation, said he saw no reason for oil purchases to be made in dollars, even if the benchmark price in dollars was likely to remain.

“The price of a barrel of oil is quoted in dollars,” he said. “A refinery can take that price and using the euro-dollar exchange rate on any given day, agree to make the payment in euros.”

One chief executive of a CAC 40 industrial group said he supported Mr Sapin’s push.

[source]

Posted in U.S. Dollar |

Dollar Weakens on Yellen Rate Pledge Before Economy Measures

23-Jun (Bloomberg) — The dollar extended its streak of declines to the longest since April before reports this week forecast to show orders for durable goods declined and a smaller gain in new home sales in the world’s largest economy.

The U.S. currency fell for the first time in three days versus the yen after Federal Reserve Chair Janet Yellen last week said the central bank remains committed to low interest rates for a “considerable time.” Australia’s dollar jumped while New Zealand’s currency reached a six-week high after a report showed manufacturing in China improved more in June than analysts expected.

“It’s a combination of the still very dovish Fed and yet still pretty decent underlying economic data,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “It’s the classic Goldilocks scenario. The data’s coming in, it’s not too hot, it’s not too cold, and people sell the dollar and trade it with a benign neglect.”

[source]

Posted in Central Banks, Economy, Monetary Policy, U.S. Dollar |

Russia, China Sign $400 Billion Gas Deal After Decade of Talks

21-May (Bloomberg) — Russia reached a $400 billion deal to supply natural gas to China through a new pipeline over 30 years, a milestone in relations between the world’s largest energy producer and the biggest consumer.

President Vladimir Putin is turning to China to bolster Russia’s economy as relations sour with the U.S. and European Union because of the crisis in Ukraine. Today’s accord, signed after more than a decade of talks, will allow state-run gas producer OAO Gazprom (GAZP) to invest $55 billion developing giant gas fields in eastern Siberia and building the pipeline, Putin said.

It’s an “epochal event,” Putin said in Shanghai after the contract was signed. Both countries are satisfied with the price, he said.

[source]

PG View: The burning unanswered question is: Payable in what currency? It almost assuredly won’t be in dollars or euros.

Posted in Currency Wars, U.S. Dollar |

PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading

25-Apr (ZeroHedge) — With 23 foreign central banks diversifying from US Dollars to Renminbi and the PBOC actively aiding numerous major financial hubs around the world with bilateral currency swap agreements, it seems yet another nail in the coffin of US dollar hegemony just got hit…

*PBOC AIMS TO SET UP GLOBAL PAYMENT SYSTEM FOR YUAN: SEC. NEWS
*PBOC TO MAKE GOLD, OIL FUTURES YUAN DENOMINATED: SEC. NEWS

Nothing lasts forever, no matter how much you believe…

[source]

Posted in Currency Wars, U.S. Dollar |

Forming Of Eurasian Economic Union And Joint Currency Accelerates

by Koos Jansen
24-Apr (InGoldWeTrust) — Several Russian media outlets have reported that Russia, Kazakhstan and Belarus, that currently form the Eurasian customs union, will sign an agreement in May to accelerate the formation of an economic union and a joint currency: Altyn.

…Documents from the Eurasian Economic Committee confirm the formation of the Eurasian Economic Union. Kyrgyzstan, Armenia and Tajikistan may join the new financial and economic organisation. Currently the three member states are at stage III of their integration process, they aim to reach stage IV by the end of 2015. Especially Putin is keen on closing a deal to move away from the petrodollar in conjunction with allies in central Asia.

…Russia’s economy is eight times smaller than that of the US, but by forming a new ‘empire’ on top of a vast amounts of resources this economic block will be a serious threat for the US petrodollar. Russia is now speaking openly about getting rid of the US dollar for trading energy, it’s building its own payment system and closing gas export deals with China – the other Asian empire. The Eurasian Economic Union will be a powerful stab at the US dollar hegemony.

[source]

Posted in Currency Wars, U.S. Dollar |

Should Investors Prepare for a Dollar Doomsday?

08-Apr (Bloomberg) — James Rickards, managing director at Tangent Capital Partners and author of “The Death of Money,” explains his view of a coming collapse for the U.S. dollar and the role confidence plays in supporting the currency on Bloomberg Television’s “Market Makers.”

“Money is a perpetual, non-interest bearing liability issued by an insolvent central bank.”

[video]

PG View: Rickards is always a great interview. He remains steadfast in advocating that gold should be a part of every investor’s portfolio.

Posted in Central Banks, Gold Views, U.S. Dollar |

Russia prepares to attack the petrodollar

04-Apr (Voice of Russia) — The US dollar’s position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.

The existence of “petrodollars” is one of the pillars of America’s economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer want to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom’s natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.

Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the “sanctions war” between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .

[source]

PG View: Efforts to terminate the “exorbitant privilege” afforded the U.S. because of the reserve status of the dollar seem to be escalating.

Posted in U.S. Dollar |

Things That Make You Go Hmmm…: Fight Club

by Grant Williams
01-Apr (Mauldin Economics) — Sometimes the sand shifts beneath your feet without your realizing it. Other times you can see it happening.

…Countries are maneuvering for a place in the post-US-dollar world they see rushing towards them as US hegemony comes under increasing pressure, both from inside its borders (it has the largest deficit in world economic history) and abroad (major powers are aligning with the explicit purpose of reducing dependence on the increasingly shaky US dollar).

Make no mistake: should the Chinese ever announce some kind of commodity-backed currency (and that commodity would most likely be gold), or should the GoP announce a central peg of their own around which they could (and would) all trade, they would supplant the dollar as the world’s reserve currency, and it would be game over for the US.

Nothing would please Russia more, and China would shed not a tear.

…How this plays out is anybody’s guess right now, but this much I know: one should NEVER underestimate the ability of the average Russian to bear hardship, nor should one ever underestimate the West’s lack of fortitude once any situation becomes politically unpalatable.

I also know that everywhere you look around the world, electorates are just itching to vote for change and to hand power to new parties and new leaders, many of which are extreme in nature and possess the ability to seriously upset the status quo.

What else do I know? Well, I know that neither Russia nor China feels the US’s place at the top of the food chain is either justified or indefinitely sustainable, and they both smell weakness.

[source]

Posted in Geopolitical Risks, Gold Views, U.S. Dollar |

Euro heads for worst week in 16 months on ECB bets

01-Nov (Reuters) — The euro fell for a fifth day against the dollar on Friday, heading for its biggest weekly loss in 16 months, on growing expectations the European Central Bank will ease monetary policy further to protect growth.

More losses are likely as traders said the single currency’s climb in recent months was overdone. The euro hit a 23-month high above $1.38 last Friday, a gain of more than 8 percent from early July.

Plunging euro zone inflation is raising the specter of deflation in some areas and fueling bets the ECB will be forced to ease monetary policy in coming months. A rate cut will erode the euro’s interest rate advantage over other major currencies.

[source]

Posted in Central Banks, Monetary Policy, U.S. Dollar |

Euro on the ropes after dive in inflation

01-Nov (Reuters) — The euro tumbled to a two-week low on Friday after a plunge in euro zone inflation left markets suddenly eyeing the outside chance of a cut in interest rates by the European Central Bank next week.

…After its biggest fall in six months in the previous session, the euro fell to $1.3530, on course for a fall over the course of the week of two percent.

“It is clear that there has been a major sentiment change on the euro,” said John Hardy, head of FX strategy at Saxo bank in Copenhagen.

“The ECB’s single mandate has always been on inflation so this gives Draghi and co further reason to do something at next week’s meeting. We see considerable further downside. The likes of euro/dollar back into the old range, down towards $1.30.”

[source]

PG View: I would suggest that the recent gains in the greenback are less a function of actual dollar strength, and more a function of renewed euro weakness amid heightened easing expectations.

Posted in Currency Wars, Deflation, inflation, U.S. Dollar |

Dollar edges up but stays close to nine-month low on Fed view

28-Oct (Reuters) — The dollar edged higher on Monday but held close to a nine-month low against a basket of currencies, with most investors convinced that the Federal Reserve will maintain its ultra-loose monetary policy this week and in the months ahead.

The Federal Open Market Committee, the Fed’s policy-making arm, is unlikely to make any shift to policy at its meeting on Tuesday and Wednesday as the Fed awaits more evidence of how badly Washington’s budget battle has hurt the U.S. economy.

Many economists believe the Fed could stand pat for the rest of the year. Most expect the central bank not to begin withdrawing its $85 billion per month bond buying program until March 2014.

“It may turn out that a neutral FOMC is a green light to keep selling the dollar until November headline data begin appearing in early December, but as we note above there is already a lot of dovishness priced in,” said Steven Englander, global head of foreign exchange strategy at CitiFX, a division of Citigroup in New York.

[source]

Posted in Central Banks, Monetary Policy, QE, U.S. Dollar |

China is now overtly pushing for the US dollar to be replaced as the world’s reserve currency

by Alasdair Macleod
21-Oct (ZeroHedge) — Xinhua, China’s official press agency on Sunday ran an op-ed article which kicked off as follows:

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

China does have a broad strategy to prepare for this event. She is encouraging the creation of an international market in her own currency through the twin centres of Hong Kong and London, side-lining New York, and she is actively promoting through the Shanghai Cooperation Organisation (SCO) non-dollar trade settlement across the whole of Asia. She has also been covertly building her gold reserves while overtly encouraging her citizens to accumulate gold as well.

There can be little doubt from these actions that China is preparing herself for the demise of the dollar, at least as the world’s reserve currency. Central to insuring herself and her citizens against this outcome is gold. China has invested heavily in domestic mine production and is now the largest producer at an estimated 440 tonnes annually, and she is also looking to buy up gold mines elsewhere. Little or none of the domestically mined gold is seen in the market, so it is a reasonable assumption the Government is quietly accumulating all her own production without it becoming publicly available.

…The West selling its stocks of gold has become the biggest strategic gamble in financial history. We are committing ourselves entirely to fiat currencies, which our central banks are now having to issue in accelerating quantities. In the process China and Russia have been handed ultimate economic power on a plate.

[source]

PG View: If you personally are disinclined to commit yourself entirely to fiat currency, now is the time to get some gold…

Posted in Gold News, Gold Views, international reserves, U.S. Dollar |

Japanese Money-Pumping Spells Worthless Yen, Says Axel Merk

24-Jul (Bloomberg) — The yen will extend its world’s worst performance among major currencies this year as a reinforced Japanese government continues pumping cash into the economy, according to Axel Merk of Merk Investment LLC.

“Our price target for the yen is infinity, meaning we think the yen is going to be worthless down the road,” Merk, president and founder of the Mountain View, California-based company, said today in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “They’re going to try to pump as much money into the economy as possible and at some point they’re going to break their own neck with that.”

[source]

Posted in Currency Wars, U.S. Dollar |

About That Supposed Correlation Of The U.S. Dollar And Gold…

08-Jul (ZeroHedge) — One of the most widely accepted truisms in what passes for our financial media is that the dollar and gold are correlated: when the dollar weakens, gold rises, and when gold rises, the dollar declines.

Nice, except this vaunted correlation isn’t remotely visible in the charts.

…the peaks and troughs do not align–not even close.

…The supposedly inversely correlated DXY and GLD have risen in tandem for several significant stretches of time.

[source]

Posted in Gold News, Gold Views, U.S. Dollar |

Dollar shines after Fed signals stimulus withdrawal

20-Jun (Reuters) — The dollar rose broadly on Thursday and was poised for further gains after the Federal Reserve signaled it would begin withdrawing stimulus this year as the U.S. economy improves.

Chairman Ben Bernanke said the Fed was likely to end its bond-buying program by the middle of 2014, prompting traders to reestablish bets on a higher dollar.

Analysts also said the dollar’s resurgence could put an end to the recent resilience of the euro, potentially pushing it below $1.30 as markets become wary about the prospect of lower European Central Bank interest rates.

[source]

Posted in Central Banks, Monetary Policy, QE, U.S. Dollar |

Indian Rupee Hits Record Low

10-Jun (New York Times) — The rupee fell to a new low against the dollar on Monday, hitting 58 rupees per dollar at one point. The previous low was recorded in June 2012 at 57.33 rupees for a dollar.

While the sharp fall in the rupee was caused mainly by the strength in the United States currency, experts say that India was particularly affected because of its widening current account deficit, brought about by huge imports of crude oil and gold over the past year.

[source]

Posted in U.S. Dollar |

Dollar Falls Against Euro Amid Fed Stimulus Bets; Franc Weakens

21-May (Bloomberg) — The dollar fell against the euro for a second day as comments from Federal Reserve policy makers fueled speculation Chairman Ben S. Bernanke will tell Congress tomorrow the pace of monetary stimulus should be maintained.

The greenback pared gains versus Japan’s currency after St. Louis Fed President James Bullard said the central bank should keep buying bonds under quantitative easing. New York Fed President William Dudley said policy makers had previously been overly optimistic about economic growth. The yen fell earlier as Japanese Economy Minister Akira Amari backed away from weekend comments that prompted it to rally. The Swiss franc weakened.

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Posted in Central Banks, Monetary Policy, QE, U.S. Dollar |