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Quiet here.

A New 'Carry-Trade' Currency? U.K. Pound Emerges as Possibility l

Stereo

Same time, different place :-)

Tobin Tax to be on the G20 Pittsburgh agenda.

This is total cr@p imo. It will never be implemented.

Hil, you're right. It won't happen. What's more, it doesn't address the real problem.

Where is US Dollar going?
Posted by Henry Liu on September 21, 2009 under Currency Trading Tips | Be the First to Comment

Market has been very unforgiving to the USD lately as the greenback slips into further weakness; as a matter of fact, the more recovery we see, more reason for USD to weaken, at least until Bernanke starts rate hiking cycle

Let me explain,

USD is considered as the primary safe-haven currency as the US Treasuries is The Safest Financial Instrument in the world, as it is backed by the full faith and credit of the United States, or the worlds largest economy. Needless to say, if US Treasury defaults, it probably wont matter because the world must be in deep doo-doo for that to happen. Case in point, remember what happened with Lehman Brothers and the aftermath of the world economy? Consider that and multiply by 10,000 or more when and if the United States collapses, not only China, Japan, and all of Europe will go with it, leaving civilization back to the stone ages where we barter for commodities, I think the entire world monetary system will
disappear

Now looking at the recent decline of USD versus the optimism in the market, it does not take a genius to see that the market is going opposite direction. That is because the borrowing cost for USD is the lowest among all major currencies, putting even the JPY at about 6 basis points more expensive to borrow than the USD. (3-month Libor rate for JPY is 0.35% and for USD is 0.29%) Thus making USD the new carry currency of the world.

So what is likely to happen? I think well see a gradual and steady decline of the greenback in the mid to long term. As the national debt accumulates under Obama administration, a weaker dollar is probably not a bad thing making USD weaker by 10% in a year, translates to a deduction of the national debt by 10%; you gotta admit it, it is an ingenius plan (of course, the long-term outlook is still going to be bad, but the jury is still out on that)

So what is the outlook for USD? I think unless Bernanke starts to hike rates, expect to see USD remain weak as there is no reason fundamentally for a stronger USD. And when do we expect to see Bernanke hike rates? Well, the short answer is at least the 2nd half of 2010 if not early 2011. So expect to see USD under pressure for the next 8 to 12 months minimum.

Henry Liu

What spooked cable at 8.30 am this morning ?

Merv opening his big mouth again.

Ta Merv :-)

Kerching!

Do any currency guru's on here have a view on the Lat about to de value ?

It would be a kick in the Baltics, I guess.

:o)

May be of interest to FX traders, has the Holly Grail been discovered? (No) :>)
Would it work?

I'm giving this a go today.

Hows it going ?

Who me?

Yeah , been trading currencies myself for about 9 months now since finishing work and just wondered how you were finding it.

I can't get my head round it Dil.

Think I'll stick to Indices.

Never tried indicies and it's only now that I'm home all day if I choose that I've been able to make currencies work for me (so far).

I've emailed you.