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About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, September 11, 2009

US Dollar -- $USD

I did make a good call on the dollar in early 2008 (saw it higher), but
Forex is not a game of interest to me. So currency posts are very few
and far between.

The dollar has lost ground since early in the year. The Fed has
provided strong money liquidity growth and is running an effective
ZIRP with Fed Funds %. Meanwhile, my inflation pressure gauges,
after bottoming early in the year, are moving up and the CPI without
seasonal adjustment is higher than at y/e 2008 on a lift in petrol
prices. So, the dollar supply has been increasing and money left on
deposit is earning a negative rate of return. The purchasing power of
the dollar is declining in the US, and with global economic recovery in
prospect, no need to blame traders for exiting the dollar, even though
the supply of dollars moving offshore has declined dramatically.

Internal or domestic fundamentals for the dollar will not improve
until basic money growth moderates and short term interest rates
turn positive in real terms. Economic recovery here will bring that
moment closer, but it is a ways off for now.

The $USD is moving toward an oversold position in the forex
market for the first time since early 2008, so a rebound in the next
several weeks cannot be ruled out despite the internal fundamentals.

Here is a link to the weekly $USD.

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