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10/13/2010 0 Comments Weak dollar = Weak consumerWith the export driven currency war starting to heat up there is a lot of talk about the benefits of a weaker dollar and how it will help the U.S. cope with its rising debt load and create a boon for exporting companies. There is another side to this issue that could hurt economic growth through consumer spending, a very important factor going into the holiday seasons. With the dollar dropping the prices of our imports will increase, making items such as gas, and food more expensive. Right now companies are looking at taking a hit to keep the costs from hitting the consumer, but they can only sacrifice for so long. If consumers start to feel a pinch at the pump and grocery stores they will have less income to save, which would equate to less discretionary spending and less down payments.
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10/5/2010 0 Comments Race to the QE lineThe Bank of Japan’s surprise rate cut and talk of purchasing securities in the open market have not stopped the appreciation of the Yen. I feel that the BOJ will have to inject more capital into the markets if they want to see their currency drop. Lowering their near zero interest rates to closer to zero was not convincing to the markets…in fact the Yen rose to the Dollar throughout the trading day in the US. This relentless beating on the dollar is hard to ignore and difficult to time in relation to when, or if, you would want to long the dollar. I still believe that the Euro, with all of the negative news coming from the region, will decline, as of now I feel there is a lot of running on good news and ignoring of bad. The dollars decline has gotten so low on the news of the Fed conducting more quantitative easing that the official word if an easing program being put in place could see a rally in the dollar, especially if the measures are not as extreme as the decline has warranted. With currencies hitting record highs/lows to each other while all major currencies seem to be looking towards the same steps in regards to quantitative easing there is not doubt that there is a level of mispricing in the currency markets. The problem is this could continue until there are a bit more quantitative measures for the quantitative easing.
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