Time to buy the DOLLAR?

[flow5]

research.stlouisfed.org/fred2/data/DTWEXM.txt

Trade Weighted Exchange Index: Major Currencies


2011-05-02 68.2405 bottom
2011-05-03 68.2599
2011-05-04 68.4627
2011-05-05 69.1696
2011-05-06 69.2776
2011-05-09 69.7913
2011-05-10 69.6003
2011-05-11 69.7069
2011-05-12 70.0010
2011-05-13 70.3690
2011-05-16 70.1436
2011-05-17 70.5350
2011-05-18 70.1919
2011-05-19 70.2388
2011-05-20 70.4030
2011-05-23 70.9474
2011-05-24 70.7142
2011-05-25 70.6236
2011-05-26 70.6147
2011-05-27 69.9215
2011-05-31 69.6856
2011-06-01 69.5404
2011-06-02 69.8021
2011-06-03 69.2516
2011-06-06 69.2454
2011-06-07 69.0448
2011-06-08 69.2649
2011-06-09 69.3157
2011-06-10 69.8140
2011-06-13 69.7819
2011-06-14 69.4077
2011-06-15 70.2211
2011-06-16 70.5314
2011-06-17 69.9660
2011-06-20 69.9581
2011-06-21 69.6546
2011-06-22 69.6485
2011-06-23 70.4232
2011-06-24 70.4395
2011-06-27 70.3812
2011-06-28 70.0790
2011-06-29 69.6748
2011-06-30 69.3559
2011-07-01 69.3468
2011-07-05 69.4543
2011-07-06 69.8106
2011-07-07 69.6880
2011-07-08 69.8450

====================================
Daily Treasury Yield Curve Rates

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr

05/02/11 0.02 0.05 0.10 0.22 0.61 1.01 1.96 2.66 3.31 4.14 4.38
07/15/11 0.02 0.02 0.05 0.15 0.37 0.62 1.46 2.19 2.94 3.92 4.26

Assume rates will climb after debt ceiling is lifted.

====================================

Consumer Price Index:

2010-01-01 216.687
2010-02-01 216.741
2010-03-01 217.631
2010-04-01 218.009
2010-05-01 218.178
2010-06-01 217.965
2010-07-01 218.011
2010-08-01 218.312
2010-09-01 218.439
2010-10-01 218.711
2010-11-01 218.803
2010-12-01 219.179
2011-01-01 220.223
2011-02-01 221.309
2011-03-01 223.467
2011-04-01 224.906
2011-05-01 225.964
2011-06-01 225.722

Inflation just bottomed (dipped).

===========================

Real gDp 1.9% in 1st qtr:

2008-01-01 13339.2
2008-04-01 13359.0
2008-07-01 13223.5
2008-10-01 12993.7
2009-01-01 12832.6
2009-04-01 12810.0
2009-07-01 12860.8
2009-10-01 13019.0
2010-01-01 13138.8
2010-04-01 13194.9
2010-07-01 13278.5
2010-10-01 13380.7
2011-01-01 13444.3

Up from here.

=========================

7/12/2011: "The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total May exports of $174.9 billion and imports of $225.1 billion resulted in a goods and services deficit of $50.2 billion, up from $43.6 billion in April, revised"

=========================

Rates, real gDp, trade deficit, & inflation should reverse causing the dollar to strengthen.

[maui1]

i buy the dollar.......long term, it we don't raise the debt ceiling.

[usaone]

Dollar will strengthen with the debt ceiling raised.

[maui1]

for a short time, but long term, if you want a strong dollar, you need a strong dollar, and the only way to make the dollar strong, is to stop printing more of it, diluting it's value.

[flow5]

Consider that MMMFs have been said to have European debt exposure. Not true. MMMFs do a large amount of RPs with European-name banks but the actual banking business is in the US and is fully secured. The U.S. dollar is more secure than the press claims.

[decoy409]

flow,more secure? Where do you come up with that one? Not jumping on you but paper is paper,and in this case of paper,the cake has been printed out and overvalued in so many instances 10 fold and better than what is on that paper.

Banking buisness controlled by only a few and what has transpirred from those few I would call anything but secure.

Hey FTI! Now that was realy funny back there!

""Iam sorry son what are you playing with in your hand? "

Thanks for the great laugh!

[usaone]

Buy the dollar.

[lifewasgood]

I am afraid the dollar will continue its fall as more QE is on the way. The Fed needs the Debt room so it can create more money providing capital to Central Banks so they can loan to bailout the EU. Anytime you hear IMF involvement that equals US Taxpayers are going to be handed the bill. Should interest rates rise, the banks will then loan out the mountain of cash they are holding, which will create an additional 9X the amount of money. This will also cause inflation in commodities.

With todays world events, I see nothing that will halt the dollars demise and gold and silvers rise. Just the way it is under these conditions!

[decoy409]

"Dollar will strengthen with the debt ceiling raised."

The DEBT is the debt dollar by over a QUADRILLION. What does the sheepdog say to the coyote,"will that be one lump or two."

I am almost starting to believe that some may actually think they are the fictional 'Highlander' character.

[flow5]

"Where do you come up with that one?"

Not Bernanke (he said just the opposite), but ICI.

[lifewasgood]

“As a result of this audit,we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. This is a clear case of socialism for the rich and rugged,you’re-on-your-own individualism for everyone else.” Senator Bernie Sanders VT

Does your charts and numbers account for this 16 trillion?

[usaone]

The Dollar is having a nice run.

[maui1]

The Dollar is having a nice run.

so did the housing market in 2006/7

and btw- you don't have to "play the hand you are dealt".......as you can fold, and move to the next hand.

[verrip1]

The hand I've been dealt looks like the YTD graph of UUP, the bearish dollar etf. The dollar slipped through the end of August. Then it's up this month. The dollar was weakening. Now it's strengthening. That's reality. Theories about excessive debt, metals, safe havens, etc. are all just rationalizations to try to explain reality.

The charts ARE the reality, not the theories.

[maui1]

The charts ARE the reality, not the theories.

ok, but understanding why the charts read the way they do, makes all the difference in the world. what if there is a mistake made in any of the areas that mistakes can be made.......do you trade on what the charts say, or do you step back and say...."gee....this does not make sense"?

[usaone]

Sept 16, 2011 10:09:56 GMT -5 @maui1 said:

The Dollar is having a nice run.

so did the housing market in 2006/7

and btw- you don't have to "play the hand you are dealt".......as you can fold, and move to the next hand.

Your comparing the Housing Bubble to the Dollar at a historic low?

[maui1]

nope............just saying that........just because something is going up, it does nothing to determine 'real value'.

again...as i have stated a thousand times on these boards.......just because we can print fiat paper dollars, it does nothing the strengthen our currency, that is as bad as the rest.

in fact, printing.........might just make our dollar the worse! each new dollar printed, steals a little more of every american's wealth.

[verrip1]

Sept 16, 2011 10:39:00 GMT -5 @maui1 said:

The charts ARE the reality, not the theories.

ok, but understanding why the charts read the way they do, makes all the difference in the world. what if there is a mistake made in any of the areas that mistakes can be made.......do you trade on what the charts say, or do you step back and say...."gee....this does not make sense"?

You're asking the market to conform to your predetermined criteria. That is, if the reality does not 'make sense' to you, you should question if your precepts are wrong, not bang your head against the wall and rail against the reality.

If it were repeatable science, then some master mathematical solution would define everything economic (LTCM tried that, but it didn't work out very well for them, did it?). Economics is not a true science; it is inherently imperfect and has inherent unpredictability. There is no absolute truth to how it works. No infallible precepts. No guarantees. No Bible to tell you how to invest based on the Book of Numbers. Just tendencies and realities. Historical charts show us the reality, and projected charts are little more than our own guesswork based on our own experiences and biases.

It is the folly of man to believe that he can find a truth that will explain it all. That's not to say it's all random, either. Instead it's something in between. To deal with it successfully, I'd say that people need to be flexible in their approach. Recognizing and accepting what has actually occurred and questioning how that might be either the same, or different, in the future.

[usaone]

Sept 16, 2011 11:16:45 GMT -5 @maui1 said:

nope............just saying that........just because something is going up, it does nothing to determine 'real value'.

again...as i have stated a thousand times on these boards.......just because we can print fiat paper dollars, it does nothing the strengthen our currency, that is as bad as the rest.

in fact, printing.........might just make our dollar the worse! each new dollar printed, steals a little more of every american's wealth.

Everyone knows that. Increasing the money supply is temporary.

[maui1]

Everyone knows that. Increasing the money supply is temporary.

tell me when you think it might stop and then start to contract to reduce all that has just been put into circulation? one year, two, twenty?

[usaone]

With no imminent QE III. It already started. That's why Gold stopped going higher several weeks ago.

[maui1]

With no imminent QE III. It already started. That's why Gold stopped going higher several weeks ago.

if you really believe that..........i have real concerns

[Tosh]

tell me when you think it might stop and then start to contract to reduce all that has just been put into circulation? one year, two, twenty?

Deficits are not the solution, but the means to buy the private sector time to heal, my guess is the recovery will gather pace in 2015.

Dollar buying is a bit premature, there are still some rocky times ahead, I would stay with Gold until the end of next year.

[usaone]

Good post.

I have stated many times that what the Fed and central banks are doing is to add stability and give the private sector time to heal.

[usaone]

tfc-charts.w2d.com/chart/US

[flow5]

Nice graph.

NEW YORK (Dow Jones)--Foreign central banks drew no funding from the Federal Reserve's currency swap lines in the week ended Wednesday, Sept. 14.

The Fed established currency swap lines to ensure the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and the Swiss National Bank have access to dollar liquidity. Sovereign debt problems prompted the creation of this program as fears rose about European banks' ability to access short-term funding.

In a separate move Thursday, these central banks--except for the Bank of Canada--announced a coordinated effort to make sure U.S. dollar needs in the European banking systems are met. The joint action involves three new funding operations aimed at easing funding conditions as anxious private-sectors investors hesitate to lend their money to this debt-stricken region of the world.

In recent weeks, the deteriorating euro-zone sovereign debt crisis has spread into concerns about the region's banks, sparking a shortage in dollars and inflating short-term borrowing costs.

It's unclear if the Fed's existing forex swap lines will be used in Thursday's new joint program, but any use of these channels will be reflected in next week's report by the New York Fed.

The New York Fed releases details about the use of the central bank's foreign currency swap lines weekly, each Thursday. Reports that are posted at www.newyorkfed.org/markets/fxswap/.

At the height of the 2008 financial crisis, these central banks borrowed totaled hundreds of billions through this facility as financial institutions scrambled for dollars.

The facility was reintroduced in May 2010, but has been little used. The European Central Bank was the last to tap the line for $500 billion in the week ended Aug. 24.

==================

As the EURO's "bank run" (liquidity funding), was assuaged, the dollar index (safety haven) fell.

[flow5]

As global policy makers fight to stave off another financial crisis, five of the world’s most important central banks announced a coordinated U.S. dollar liquidity injection to quell fears that European banks were having financing troubles.

A day after Moody’s downgraded two of France’s biggest banks, and amid generalized fear over the funding position of major European banks, the Federal Reserve, the European Central Bank, the Bank of Japan, the Swiss national Bank, and the Bank of England announced they would be offering unlimited U.S. dollar liquidity, against eligible collateral, to any institution that needed it.

...The move consists of three U.S. dollar liquidity-providing operations with maturity of approximately three months covering the end of the year. All three operations will be carried out at fixed rates with full allotment, which means banks will provide as many dollars as they can get their hands on.

Stoking fears of the financial collapse of 2007 and 2008, liquidity problems had been causing headaches for major European banks and policymakers. As the sovereign debt crisis that started in Greece and spiraled through the so-called PIIGS continues to haunt markets with the possibility of a collapse in the Eurozone, U.S. money market funds became increasingly risk averse. Money market funds provided a substantial chunk of European U.S. dollar liquidity; as these reduced their exposure to the Eurozone, the financial sector in the Old Continent came under greater pressure. (Read Euro Banks Stocking Up On Dollars To Avoid Liquidity Squeeze).

The announced intervention aims at bolstering confidence for the Euro banking sector. As Jens Nordvig of Nomura explained, there was no outright U.S. dollar shortage, as the ECB’s U.S. dollar lending facility was hardly being drawn on. ”This is just broadening future funding options for banks, rather than having any large flow impact in the near-term,” explained Nordvig, who added “”this may be very important for psychology around banks.”

The reality is that funding issues were a consequence, and not a cause, of sovereign debt tension, according to Nordvig. ”The underlying issue remains the same. The hey issue is Italy, they are in a grey zone on debt sustainability, and as long as that remains the case, banks will have a hard time looking safe, and having normal access to funding,” explained Nordvig.

On Wednesday, Moody’s downgraded Societe General and Credit Agricole, while putting BNP Paribas under negative watch. While most commentators focused on the banks’ exposure to Greece, Moody’s highlighted their exposure to wholesale funding markets given the lack of dollar liquidity, making them vulnerable to sudden market movements. (Read Moody’s Downgrade: SocGen, Credit Agricole’s Liquidity Problems Larger Than Greece).

A leaked document from the EU’s Economic and Financial Committee revealed top officials feared the possibility of a credit crunch as banks remained undercapitalized. Despite a positive market reaction, there are some who disagree with this recent liquidity injection. Dino Kos, managing director at Hamiltonian Associates, speaking at the Bloomberg Markets 50 Summit, noted “it’s like spraying foam on the runway, it doesn’t deal with deep capital issues. It is not a mini-TARP. This was about liquidity, TARP was about capital.” (Read Official Euro Document: Crisis Now Systemic As Bank Liquidity Problem Fuels Vicious Feedback Loop).

The European situation is dire indeed. After a Germany-led bailout of Greece, Portugal, and Ireland failed to calm markets, forcing a second bailout for the Hellenic Republic, the ECB was pushed in and began buying bonds in secondary markets. The ECB is pushing against the limits of its mandate, prompting heavy criticism and the resignation of top German official Jurgen Stark. (Read Europe’s QE? A Look At The ECB’s Purchases Of Italian Debt).

As the ECB continues to intervene markets in its attempts to avert another crisis, pressure will mount on its leadership which, at the end of October, passes from Jean-Claude Trichet to Italy’s Mario Draghi. In relation to recent policy action, former central banker and Dartmouth Professor David Blanchflower noted “the credibility of the ECB is in tatters,” at the Bloomberg Markets 50 Summit...


www.forbes.com/sites/afontevecchia/2011/09/16/global-central-banks-provide-liquidity-bailout-to-european-financials/

[jarhead1976]

Who has the GOLD , Germany does. The rest of the euro is well the euro backed by nothing but the promise to print more. Deutsche mark coming Back?

[flow5]

A nation has a TRADE DEFICIT when the cost of merchandise imports exceeds the receipts from merchandise exports. The CURRENT ACCOUNT balance encompasses merchandise, service items, commodities, and “current” financial transactions; while the BALANCE OF PAYMENTS includes the entire above plus capital flow items; all transactions involving foreign exchange.

The foreign exchange value of any currency is determined by the supply of and the demand for that particular currency. In international financial analysis supply and demand take on an unique role; for what is demand form our point of view is supply from the standpoint of foreigners – and vice versa.

All transactions that require the conversion of foreign currencies into dollars constitute a demand for dollars. These include exports, payments received for services rendered to foreigners, capital flows (interest and dividends collected from foreigners), etc. An increase in the volume of any one of these times will increase the demand for dollars and, ceteris paribus, the foreign exchange value of the dollar. The opposite types of transactions, imports, etc., which involve payments to foreigners increase the supply of dollars and thereby reduce the foreign exchange value of the dollar.

There is no “flow” of money internationally, only offsetting debits and credits on the books of the financial institutions involved in financing trade or other transactions. A slight modification of this statement is necessary to take account of the movement of paper and coin currencies. Their contribution to surpluses or deficits is extremely minor and short run, when not actually offsetting.

In foreign exchange supply always equals demand at the current rates of exchange. International debits equal international credits. The balance of payments always balances since there can be no credit transfer of funds.

When the balance of payments is balanced by foreigners acquiring net holdings of our equities, bonds, and real estate, and capital outflows (interest, dividends, rentals, etc.) exceed inflows, we are either decreasing our net creditor position in the world, or increasing our net debtor position.

I.e., Germany's exchange rate will be determined by it's trade & current account - it doesn't sell its gold.

[verrip1]

Sept 17, 2011 13:15:35 GMT -5 flow5 said:

I.e., Germany's exchange rate will be determined by it's trade & current account - it doesn't sell its gold.

I beg your pardon. Did you really mean to post that you believe that Germany has never sold any of its gold reserves?