Dollar Debate Misses at G8, but Criticism is still there

So the Dollar was spared yesterday, spared by a seemingly minor situation in an obscure city in an insignificant province of a very relevant state. The Uighur uprising in China took the debate about the value of the dollar as a global reserve unit off the table at the G8 (due to the fact the Chinese president, Hu Jintao, was forced to leave the summit), however it did not stop the show of concern that America’s counterparts in the G8 had.Germany, one of the US’s staunchest supporters during the Bush years, have chilled that relationship and have become more openly critical of the Obama administration. In the past, when the German government had a problem with the US’s policies, you read about it weeks after it had been sorted out, George W. Bush had a great relationship with the German Chancellor Merkel, and it showed. It is ironic. Obama’s social philosophy is more aligned with the German’s and much of Western Europe for that matter, Bush was far to the right of where Europe was. However, we are seeing a spate of discontent from the Western European leaders at the Obama policies – and this is most evident in the words and silence of Germany. Long-time Forex traders know this to be true as in the past, we did not see the spikes we do today in the Dollar, after a European leader gives a speech, today it is routine.In the absence of the BRIC debate on a global reserve currency, Angela Merkel, the German Chancellor, filled in nicely and spoke of how the focus of many nations vital to the economic stability of the world has been on reliving mistakes of years past. By assuming the policies of stimulating the economy through a broad array of spending programs, a tactic that was employed and failed in 1933, the rising debt has been ignored and has grown in such a manner, that the entire world is now under threat of jeopardy in more profound manner.Merkel’s concerns are valid and traders need to keep this in mind when dealing in the Dollar. As we have seen, the Japanese Yen has been profiting nicely from the return of safe-haven flows where it usually took a secondary role to the Dollar in this capacity. The Dollar is volatile, more than ever before, because traders as well as the long-term investors are unsure of which way to go. Sentiment keeps us in the Dollar, but reality forces us to look away. I believe the next three months are vital to determining which way the pendulum will swing for the Dollar – and it starts with the criticism of a European leader that an American policy is too liberal. Go figure.

Stock markets are rising? Look at the Big Picture!

With many of the primary stock markets reaching yearly highs, it would appear that optimism about the prospects for a global recovery is high. The increase in overall risk appetite in the and the jump in stocks have been incredibly impressive.According to the news reports, these shifts in sentiment have been driven higher by better than expected corporate earnings out of the US along with good economic data. But something is just not adding up for me, and I am not quite sure where to place my disbelief. It is odd that just as the markets are flying, bond yields for the major economic countries, the US, Japan, England etc, are going higher. Now obviously this is due in part to trader speculation that once the recovery takes hold, these countries will have no choice but to start raising their low rates. But what concerns me is the effect of quantitative easing that many of these countries employed. Funnelling money into the system at such a large rate as many of these countries had, will no doubt cause mild to moderate inflation – which would require lower rates. So what is going on?Last week gave us a clue that all is not so rosy though. England reported a weaker-than-expected GDP figures for the second quarter – much weaker than expected to be specific. Perhaps the Brits are not fudging their numbers like the Americans are – not that I know anything for a fact, but it wont surprise me to find that out in a few months. This week's vast amount of economic data coming out of Europe and the US should help paint a better picture. I fully expect sugar-coating, but I know that the Forex traders will be keen to pick up on that. Among the core numbers to look for this week are the US GDP and the Chicago Purchasing Managers Index. Consumer Confidence and Housing Prices along with New Home Sales numbers are important, but this is where my scepticism is most pronounced as we have seen anomalies in these numbers in recent months and they are easier to manipulate – so keep a sharp eye out there.I expect the general tone of this week's data to support the recent signs of improvement. It remains to be seen, however, whether the outturns will be sufficient to maintain the bullish momentum as we head into August. Short of very strong numbers, I doubt it will happen. Look for a weaker week in the Dollar and look for the Aussie and Kiwi to be the beneficiaries of that.

Dollar and Yen lose safe haven appeal, but not for the same reasons

As the Dollar and Yen lose their luster for now, partly due to positive news and partly due to political uncertainty (in Japan primarily, but to some extent the US), I want to take this opportunity to rant. I have been involved in the markets for the better part of 15 years. I started my career as a stock broker and find myself now a staunch advocate of the Forex. I have weathered turbulence in the markets, former Fed Chairman Alan Greenspan’s “irrational exuberance” speech (which ironically sent the markets on the biggest rally in 50 years), the internet bubble burst and now the “biggest recession since the great depression.” I lived through 8 US presidents, saw two of the greatest leaders – economically speaking – in Reagan and Clinton and saw miserable failures like Carter and the senior Bush. But, in my life I have never witnessed such irresponsibility and lack of basic understanding of free market thought, as I have with the current president, Barack Obama.Carter was a failure, not because he held such liberal policies as many would have you believe, he failed because he was weak, in domestic and international relations he was viewed as timid and non-confrontational. Perhaps, had he been more assertive he would have succeeded in reforming the system to his liking – and I would be blaming him for killing capitalism. And, as much as people compare the two – Obama is not a Jimmy Carter. We need to look at the core of the man - Carter was weak, Obama is strong. Carter had the support of the US Congress, but was not able to achieve, because he sought bi-partisanship which he did not get. Obama does not care about what the other side thinks, as long as his side is on board it is fine. But Obama has another tool at his disposal that enables him to push his agenda through, without the help of the Congress, the Czar. In the US, cabinet members need to go through a vigorous vetting and approval process by both branches of Congress. A Czar is not a cabinet member. First introduced by Ronald Reagan to head up the war on drugs, a Czar has broad powers to do – and answers only to the president. Reagan created this role because he did not believe the drug war would go on for so long and therefore adding a cabinet post, a move that takes a constitutional amendment, would not be necessary.Obama however has gone beyond this level, appointing 33 Czars, each with an average salary of $250,000 and annual budget for office and staff of over 10 million. This is the single largest expansion of governmental agencies ever – and the fun part is this is not part of the government as the Czars answer only to the president. It is shocking – and it is why Obama is not like Carter – he has the power to achieve what he wants, whether congress says yes or no to the idea, he has a back door to his goals if he needs it.I am not sure if the American public should be more upset at the wasteful 340 million plus that this group is costing them, or the fact that Obama has given powers to a group of people that subvert the system of checks and balances that has made America unique and safe from tyranny. Congress gave Reagan the approval for this post for logical reasons - quick and decisive action was needed, and waiting for congress to approve each mission was pointless. Obama has exploited this rule and it will be to the detriment of the US populace. Take for example the idea that his health czar is proposing – taxing the rich 5% to pay for health coverage for everyone else, or his employment czar, extending benefits to the unemployed by and relaxing the rules so that they do not need to be seeking employment while getting the benefits (their rationale for this: “it is a hard job market you know – it might demoralize the unemployed to have to keep searching for a job in this tight market”). And just how do they pay for this unlimited benefit? You guessed it, taxing the rich. This makes no sense. Why penalize those who work and reward those that don’t? all you do is make the productive less ambitious to be productive and you make the non-productive dependant on a system that is willing to care for them indefinitely – so in turn there is less productivity by default. In my opinion, you don’t need a stimulus that will give people money to do nothing; you need a stimulus that will spark production – as that is what will save the economy over the long haul. For Forex traders and enthusiasts what does this mean? It means the US is moving in the direction of China and Russia and Venezuela, in which there is a central government that controls all things. So what does this mean for the Dollar? Only time can tell, but it does not look too good.

China's Dilemma - Status Quo or Shine

The Australian and New Zealand Dollars have been fairing pretty well these past few weeks. Optimism about the state of the economy and the transparency of government efforts to save what they can of their thriving commodity export business has done them well. Forex traders are aware of the highs being made by these currencies, and specifically at the US Dollars expense.The recent sale of US Dollars by China had done much to help these countries. With China being the primary buyer of their minerals and metals, the sale of US Treasuries signals China’s unwillingness to stop their rampant buying. I personally feel this is a mistake but I am glad they are doing it as it is helping the currencies I like to trade the most. The problem I see arising in the near term though is the rise in prices of core materials. The Chinese cannot continue funding their purchases by selling off their US reserves, it will only serve to hurt the value of the Dollar in the long run – and as holders of 3 Trillion Dollars worth, it is a significant amount that they have at stake. China needs to come to terms with the state of the economy and slow down on their spending right now. This can help them in two ways:1.The amount of buying they are doing is causing increased demand which is driving up prices, if they slow down, prices fall and they can save money.2. The amount of money they are spending stockpiling raw goods could be better spent taking up larger stakes in the US Dollar, by doing so they increase their political influence and are in a better position to get what they want out of the US. As well, it will help their cause with World Bank members in their efforts to establish a global reserve currency.Online Forex readers know all too well that things are not what they seem. The recent stock selloff in Asia has traders nervous. IT would go a long way to calming markets if China were to step up and seize the moment here – it could also change the way people think en masse about the US Dollar and Renminbi as a valuable trading tool.

Good or bad for the Forex? I have no Idea

Continuing my thoughts from yesterday, on Wednesday the US reported a third straight month of Factory Order increase, a sign that things are picking up in the manufacturing sector. The report was met with mixed results as the Dollar fell and stocks ended slightly off, an unusual occurrence as normally when stocks are down the Dollar is up as Forex Traders usually seek a safe haven respite. I was watching Fox Business Network and they had an economist on who was analyzing the data and came up with similar conclusions to what I had said yesterday, simply, the reports that are coming out are not reflective of “the whole picture”. So this is the story behind the factory orders data:About three weeks ago, the US announced a program called “cash for clunkers” which gives people $4,500 for their junk cars towards the purchase of a new car with more than a minimum of 17 Miles Per Gallon. This program is supposed to encourage “green” purchases to help lower overall carbon monoxide gases, as well as a boost to the ailing auto industry enabling them to see out their old 2008 models to allow for increased production of 2009 models. The program was launched in “test” areas about two months ago, and was met with wild success and went national two weeks ago. It has been so popular in the two weeks since, that Congress is approving another 2 Billion Dollars towards extending it. Old model cars are flying off the shelves and as a result, the auto factories that have been closed for the better part of the year are cranking out 2009 models to refill the auto lots. In anticipation of this success, the government asked auto part makers, those that support car manufacturing by producing the “nuts and bolts” of the cars, literally and figuratively, to begin working again – and gave them about 10 Billion Dollars in incentives to do so – taxpayer money. Aside from this, the government is not only giving those that trade in a car $4,500 on the clunkers, they also give the dealers about 15 Billion Dollars in loan guarantees, more taxpayer money, to help those that cannot afford a new car even with the $4,500 credit, finance the cars. The average car sells for $30,000 in the US. So the result of this is you have people who cannot afford a new car, people who never would have thought of buying a new car, now buying new cars to the rate of about 450,000 new cars in the past two weeks. And they are doing it for the most part, with their own present and future tax dollars. To me this is not stimulus but rather stupid. The program is good, don’t get me wrong, it helps real people, dealers, manufacturers, factory workers, but it misleads the investor as if it were not for the mass injection of cash on every level of this venture, factory orders would be negative again. What is a Forex trader to believe? This is a difficult call as the factories are working and they are cranking out new product, but it is the government that is financing all this using money that does not exist. The US government will be in a 13 Trillion Dollar hole next year – 1 Trillion less than the 2007 GDP of the country. They owe China 3 Trillion, Russia 1 Trillion and are poised to pass legislation on healthcare that will send them even further in the red. So, the factory orders are good for now, but at what cost to the value of the Dollar overall is this happening. I am not ashamed to admit that I am stumped here – I don’t know how this will play out as this is a new concept. This is not like the housing starts numbers which are skewed – real people are benefitting – but as Forex Traders how do you trade on this info? My Forex Online friends, if you have an ideas, please leave me a comment – I am curious to know how the rest of the world views this dilemma. For now, I am sticking to the Aussie as always.

Make or Break Moment for the Greenback

With all the talk lately about the dethroning of the US currency as the premiere reserve investment for sovereign countries, the debate is about to get a stark reality check. This week, the US is doing its best to auction off a whopping 106 Billion Dollars in new debt, in a bond auction and what Forex online blogs and street traders are looking for is how quickly they sell. There is no doubt that it will sell out, but the questions are, who will be doing the buying? And, how quickly will it be sold?The US auctions typically has a short life, with most of the debt going away even before the official gavel is dropped down. However, it has been a sobering sign for the US Treasury that in recent auctions, it was been more difficult to get rid of the debt, to the point that yields on the bonds and notes have hit record highs as if the buyers are saying that the investment is more risky than others and therefore you need to pay us for assuming that risk. Another telling sign of the recent sales is that when the Federal Reserve, the Central Bank of the US, sees that the Treasury auctions are not selling out in a timely manner, the Fed buys the debt. This is equated with just plain printing money and diluting the value of the dollar, as the money used to buy the debt extends the treasuries credit line with the Fed.The Fed is responsible for setting monetary policy such as interest rate levels and balancing the valuation of the dollar in relationship to other currencies. The US Treasury is responsible for the actual management of money. Yet, recent legislation has broadened the Fed’s scope of jurisdiction and it is easier for the Fed now to “loan” the treasury money.Now, Forex traders are not stupid – we were all brought up learning that paying your MasterCard with your Visa is not a smart policy of money management – yet this is essentially what the US is doing.China, Russia, Brazil and India – fondly known as the BRIC nations met last week and came out vocally for a new reserve currency alternative – and they did so by specifically mentioning the policy of printing money that the US is employing now. The statements they made make sense, how can they ensure the value of their investment if there is seemingly a conscious policy to water it down?To correlate this to other investments, take the Ford Mustang. This year the Ford Motor Company is coming out with a limited edition (only 45 cars) of the Mustang to celebrate the 45th anniversary of the car.Now, each car is unique and a throwback to the old style with modern bells and whistles and is already being bid up to over 200,000 USD per car. If Ford were to make hundreds of these cars, the uniqueness of the product will be devalued and would water down the investment value of the car. This is what the BRIC’s are afraid of.So, this brings us to the auction this week. Considering that the primary buyers of the debt in past years have been the BRIC nations, what is their interest going to be in the record breaking bond issue this week? Are they going to put their money where their mouth is or will they succumb and continue to buy like heroine addicts in need of a fix? I am not speculating on the outcome, I truly don’t have a clue. But, I do know that if they stick to their principles, the Dollar is in for a rough ride – and if they do not, the USD seems like a good investment in the short term.

Daily FX Updates

According to the news, The Dollar rose again against the Euro, which hit a new month low of 1.31 USD, even after the release of a poor US retail sales report which saw sales fall 2.7% in December. Fears over a broadening global recession were realized when Standard and Poor’s downgraded Greece’s credit rating to A- / A-2, something they had warned about doing last week. Forex traders continued their move towards the US Dollar as it is still believed in the investor community that the US currency is a safe bet.
Although the news in the US has not been great as of late, the trading and investing trends has continued to work in favor of the US as Europe continues fielding bad economic news and speculation. Forex brokerages have seen continued selling of the Euro by their customers on news of an imminent rate cut. Adding to the fire in Euro-land was Germany’s declaration that its economy shrank 2.0% in the last quarter of 2008. Coupled with the S&P downgrade of Greece was the now very real prospect that Spain and Portugal were to follow after they too received warnings a short while ago. Look for continued weakness in the Euro as more countries begin reporting their Q4 economic data.
The Euro also fell against the Japanese Yen, albeit slightly to 117.11. The Yen also traded up and down slightly all day against the USD, which was looking at a mild gain towards the end of the day. Japanese officials are monitoring the strength of the Yen in an effort to perhaps keep it from getting much stronger. It is believed that a strong Yen will hurt Japanese exports which, in this environment, are crucial to their economy.
India has said that their inflation will fall to between 3% and 4% by the end of Q1. Normally a drop in inflation is good news however given that many countries are experiencing severe deflation in this economic crisis, this raises flags for India. An economic crisis in India can have a large impact on the overall global economy. This is something to watch in the near future.

Dollar Shining After Obama Inaugural

The British Pound Sterling is falling today, down to a 7 ½ year low against the dollar and the Euro has fallen to a new six week low against the currency of Obama as well. Banking woes, economic uncertainty, lack of faith in England’s new bailout plan are all contributing to the downslide while the US is tapering some of its inauguration day losses while Forex Brokers are scrambling to find something that is stable in what has been a highly volatile week. At the moment, the Sterling is trading against the dollar at $1.3718, a 1.2% drop bringing it back to 2001 levels.
But it is not only the US Dollar that is benefitting from the British currency’s woes, the Yen, much to the chagrin of the Japanese government which wants to keep the currency from getting too strong, reached a record high against the Sterling today – up over 1% to 123.53. In what Forex Brokers see as a response that is not in line with the wants of the Bank of Japan, the Yen is gaining strength against the majors – also hitting a 13 year high against the dollar. Today, the BOJ will be coming out with a plan to boost lending to businesses (aka commercial paper) in order to thwart ill effects of this credit crisis. Look for the YEN to pare some its recent gains as the BOJ’s hidden agenda is to stem the growth of the YEN in order to protect exports as well.

Rising oil prices have them Dancing Down Under

The Dollar has fallen to a year low against almost every major currency, given the problems that the US is facing, it is understandable - but the stock market gains are what is puzzling to me.Forex Investors and traders are pumping up the markets because historically, when people have a sense of security they tend to abandon the the USD and the Yen and test their luck with stocks. If the pundit, Nuriel Roubini is right though, the global economic challenge that we are facing is far from over. Only yesterday did the US revise 4th quarter 2008 and 1st quarter 2009 figures to show a decline twice than what was originally disclosed. Worse even, than at the worst time during the Great Depression.The US Economy is still in freefall. The fact that Tim Geithner, the US Treasury Secretary, has now began telling news outlets that the biggest challenges lay ahead with the enormous deficit is a big warning sign of that. Broker trading companies investing and trading in the markets have begun to recognize this as the Dollar has matched the economy. The market seems to have reversed from a psychological one to a fundamental one and this is good.I still believe that the real money to be made lies with Australia and New Zealand. The risk is less because of the low value of their currency in comparison with the big four, Yen, Euro, Pound and US Dollar, and the yields can be higher. The Aussie and Kiwi have been doing very well as of late, and the Australian honesty we saw last week has seemingly driven much confidence in the competence of the leadership there. Oil is rising and with it other commodities that rely on the slippery black stuff to help extract it - the $71 per barrel that oil is now is very good for both down under dollars.Keep an eye out this week for the unemployment numbers from the US and the British GDP figures. They will go a long way to showing us how to move in the coming days.

Forex News

The Federal Reserve kept interest rates at current levels, but extended the long-term debt purchasing program, to the tune of $300 Billion. The move helped vault the higher yielding currencies in a display of risk appetite and gave caution to traders who were thinking that all was well in the US economy. While the Fed did say that the situation was much improved, and essentially gave no negative economic comments, the fact that they are extending the bond buying program signals that the US economy is still vulnerable and at risk of turning negative very quickly.In the past few treasury sales, the Federal Reserve has been the primary bidder, essentially printing money in order to accomplish the purchases. The US economy, according to many analysts, is at risk if inflation as a result of the aggressive spending and debt issuance. Year to date, the US debt has increased by $1.27 Trillion in the fastest and most expensive spending spree on record.At 3:00AM GMT, the US Dollar was down .25% to the Euro to 1.4221, down .22% to the British Pound to 1.6507, down .15% to the Canadian Dollar to 1.0895, down .4% to the Australian Dollar to .8361, down .35% to the New Zealand Dollar to .6737 and down .16% to the Swiss Franc to 1.0763.Other news…Norway's central bank held rates at a record low, but opened the door for increased borrowing costs sooner than expected as the economy continued to recover. Chinese stocks sank on Wednesday on fresh worries that this year's equity rally was running ahead of an economic recovery and bank lending was showing signs of cooling.

Chinese making an Impact on US Dollar

According to other sources I read after my curiosity was peaked, it seems as if the Chinese government is spread a bit too thin right now – having increased their feverish purchase plan of almost every natural resource in the Eastern hemisphere while investing heavy in mineral and oil excavation Africa as well.In an economy that thrives on exports to be spending as large as they have been under conditions that are being equated with the Great Depression is just plain crazy – and culturally it was probably not easy for them to stop when they realized this.Culturally, the Chinese are all about not making mistakes or miscalculations and while they were saying things were fine, they were really not.The theory here is that the Chinese need to unload some of the 3 Trillion greenbacks they have to raise cash – by no means am I saying that China is in trouble, but they are not as well off at this point as everyone thought.If this is the case, Forex traders can worry if they are long Dollar positions. The fact is, the Chinese have so much impact on the Forex at this moment based solely on their reserve levels, that the hint of a selloff would panic the market.I don’t believe the Chinese want to hurt the Dollar, I will say this a thousand times, it is not in their interest to do so. I just think that their needs might inadvertently lead to this and there is nothing anyone can do about it.For now, I will keep my nose in the online Forex world and ears to the whispers – perhaps I can help make more sense of this as the weeks go by.

Forex News: Euro Update

Data reported on Friday showed that manufacturing activity contracted at a far slower pace than expected, and that the services sector decline seen over the past 11 months was flat in July, lifting the Euro a bit. Forex Online Investors have still not picked up on the good news from the Eurozone despite positive growth reports from France and Germany and this signals the insecurity with the reported growth on behalf of the investors due to conflicting statements from EU officials. The next few weeks can go a long way to shedding more light on the economic situation in Europe.At the close the Euro was up .71% to the Japanese Yen to 135.2, up .5% to the British Pound to .8676, down .03% to the Canadian Dollar to 1.5487, up .1% to the Australian Dollar to 1.7155 and up .1% to the Swiss Franc to 1.5159.

ENGLAND FOREX BANK

Dollar Lending Rates RiseDollar lending rates rose on the interbank forex market despite the announcement of plans for the US government to bailout the failing Citigroup bank. The LIBOR (London Interbank Offered Rate) rate for three month loans in dollars rose slightly from 2.16% Friday to 2.17 on Monday, Nov, 24th, 2008.Increase in LIBOR RateThe increase in the LIBOR rate is important for the interbank forex, the financial sector, and the wider economy. The LIBOR determines rates for loans to households, and businesses. Many mortgages and student loans are tied to the LIBOR rate and can have wide ranging effects on the day to day economy. The rate increase suggests that banks are worried that other financial institutions could collapse in a chaotic global economy.

Section 3 - The Role of the Central Bank

The final area of the Museum is devoted to the role of the Bank and takes an interactive approach in providing visitors to the Museum with information on the mission and core functions of the Bank. In addition to the collection of historical objects relating to Central banking, the multimedia and interactive elements in this section include a Question and Answer Quiz, a money game, an audio visual presentation on the Central Bank, and real-time information on key economic developments in Trinidad and Tobago.

Central Bank Money Museum

The first section of the Museum looks at the origins of money and examines various representations of money on the global continents, including cowrie shells, a Katanga cross, gold bars and paper money. Find out about money, old and new, from Spanish Doubloons to credit cards and e-money.The Museum occupies an area of 350 sq. metres and is situated on the ground-floor of the Central Bank building. It utilises modern design concepts and contains a mix of showcases, graphics, interactive elements and multi-media experiences that aim to give visitors a memorable and rewarding experience.The Museum tells a story about the global history of money, the history of money in Trinidad and Tobago and the role that the Bank has played and continues to play in shaping the economic and financial landscape of Trinidad and Tobago. The three aspects of the story-line of the Museum is represented in a separate physical but well-integrated area.

FOREIGN EXCHANGE MARKET !

Exchange market is the largest financial market in the world. This market has a daily average turnover of US$1.9 trillion dollars a day which is greater than the combined volume of all U.S. equity markets.Foreign Exchange is a cash market in foreign currencies made by large banks. In this market, currencies are bought and sold and exchange rates are determined. Unlike the Stock Market, Forex works on a 24 hour clock allowing for after hours trading. The Forex Market allows you the freedom and flexibility to build your portfolio on your timetable not the Stock Exchanges.Forex market trading does not occur on the Stock Exchange and is considered an Over The Counter market as is the NASDAQ. These transactions can occur electronically or over the phone.