The greenback’s gain, unstoppable?

[RTFX-Trading]

BoJ kept its rate on hold at 0.5% last night. Not much movement on the market after the BoJ’s press conference. There were no particular highlights on the downside risk but mention of sluggish economic growth caused by weaker growth and high energy prices was still present.

The dollar gained more ground against the euro on Tuesday after the report of US Producer Prices for July came out double than what was expected. It came out 1.2% versus the market expectation of 0.6%. EUR/USD came down to around 1.4640 from around 1.4670 before the report.

A question looms over the gains of the green back within the past month. Why is there no pushback? According to one of the top US global financial service firms this is due to the positioning of the USD, the change in central banks’ view of their policies and the strength of USD over the past month.

The positioning of the USD is seen as to have been much shorter than what was thought it would be and that the recent USD rally has been driven by an unwinding of shorts. And although some degree of unwinding has occurred there are views that after six years of depreciation the USD are deep in shorts.

Not more than a month ago eight central banks of the G10 countries were expected to hike their rates, now eight of those banks (not necessarily the same banks as those which were expected to hike their rates) are expected to cut them. This shift in the expectation of what the central banks would do next has made a significant effect on the Forex market.

Also, the strength of the dollar, the sliding oil and commodity prices has somehow eased inflation concerns globally which in turn could allow the central banks to ease interest rates.

So now, where are we heading? Some say that USD is widely overbought by now, some say that with the weakness in commodity prices has given the central banks some leeway on their monetary policy and that eventually with central banks beginning to cut rates there is an expectation of stronger rates support. Until then there could be some retraction in the dollar, but in the meantime the dollar gain could still continue further.

[cortot7]

The dollars comeback seems to be unstoppable, but here is what I think of it.
For the past few years many people have been buying US securities, or even more structured products. These purchases have cushioned the Dollar's fall over some length of time, without preventing an exaggeration to 1.60 against EUR and below par for USD CHF. Now, people start realising that many of those "assets" are in fact worthless and that they will have to write them down to a symbolic unit of their respective currency. Those potential Dollar sellers are all disappearing from the market, taking off a lot of pressure. On the other hand, the few who might have hedged their Dollar exposure through forward sales will be compelled to cover them by buying back, adding to the demand. Any downwritten Dollar is no longer for sale, but the whole American indebtedness will come to a head, i.e. there will be no winners, but losers only (expect some Wall Street - and other Bankers getting unjustifiable bonuses).
It sad to notice, but we are all being done and ruined by a declining empire and all currencies are racing towards zero, lets just hope the CHF will be the slowest one...

[cortot7]

The dollars comeback seems to be unstoppable, but here is what I think of it.
For the past few years many people have been buying US securities, or even more structured products. These purchases have cushioned the Dollar's fall over some length of time, without preventing an exaggeration to 1.60 against EUR and below par for USD CHF. Now, people start realising that many of those "assets" are in fact worthless and that they will have to write them down to a symbolic unit of their respective currency. Those potential Dollar sellers are all disappearing from the market, taking off a lot of pressure. On the other hand, the few who might have hedged their Dollar exposure through forward sales will be compelled to cover them by buying back, adding to the demand. Any downwritten Dollar is no longer for sale, but the whole American indebtedness will come to a head, i.e. there will be no winners, but losers only (expect some Wall Street - and other Bankers getting unjustifiable bonuses).
It sad to notice, but we are all being done and ruined by a declining empire and all currencies are racing towards zero, lets just hope the CHF will be the slowest one...