AHHHHH, LOOK OUT! Dollar's slide picks up steam
OK, so the title of this post didn't need to be so dramatic. At first I was going to just call it "Dollar's slide picks up steam," but I've found that sensational titles get read more than boaring ones so I am shamelessly trying to pick up recs :). Besides I think that this is an important subject that needs to be discussed. I look forward to reading your comments. Now onto the post:
I thought that it was funny the other day when the dollar jumped against the Euro and other currencies when the Fed made its surprise announcement, injecting liquidity and proving that it was in communication with foreign central banks. While it provided a nice boost to the stock market, it probably will have no real impact upon the U.S. dollar. The Fed is still going to cut interest rates at its next and probably additional future meetings at a faster rate than the European Central Bank will, if they even cut at all. Plus, U.S. will continue to print money and run up the deficit. That would have been one heck of an opportunity for a currency trader.
I really don't see anything changing for the dollar in the near future either. For a while I was on the fence about whether the U.S. is headed into a recession. I continue to become more and more bearish about the economy. Ignoring all of the terrible jobs data, foreclosures, and other statistics that have come out recently to me one of the more important things that is happening right now is that the price of everything continues to rise. Regardless of the reason, whether it is investors and traders fleeing from the dollar, global demand, etc... the price of food, oil, and gas continues to skyrocket. I don't know about you, but some of my main expenses (besides my mortgage payment that I signed up for at the peak of the market) are gas for my cars, food for my family, and electricity / heat formy home. When the prices of these things increase dramatically, I feel it in my wallet and I feel the need to cut back on purchasing "fun" discretionary things like going out to eat, buying new clothes, or byuing other toys for myself. Don't get me wrong, I'm not a pauper but I think that my own personal consumer confidence, along with that of the rest of America has been shattered. I don't see how this doesn't hit the econemy and hit it hard. If the economy does dank, the Fed will have no choice to pick the lesser of two evils, ignore inflation, and continue to cut interest rates...especially in an election year. Not to mention the fact that the Fed will feel the need to do everything that It can to help prevent the ailing banks from going out of business. The lower rates go, the lower the dollar will fall. On a positive note I noticed that my HELOC payment dropped significantly this month so keep those rate cuts coming Ben ;).
The dollar fell below 100 yen and hit a new record low against the Euro this morning. This is one of the reasons why I have been so vociferous in my posts and active in my personal portfolio to try to take advantage of the falling dollar. Things that will benefit as the dollar continues to fall include many foreign stocks, many U.S. companies that have a substantial international presence or that export goods, and commodities especially oil, gas, and precious metals.