RED ALERT: FX Dislocation In Process

reply to post by ProfEmeritus


I don't know if it is of much importance but yesterday 17/Feb on a TV Thai News they were speking about the government and financial institutions in that country buying big amounts of US$ to devaluate their currency.
Of course Thailand itself cannot be a major player in this game but...

Originally posted by HunkaHunka
Bloomberg JUST NOW had a segment on this.

The Singaporean correspondent chalked it up to Korean banks and debt being called.

The Woori effect??

Probably a contributing factor

Are you guys going to keep me up all night again?

I did impress my husband with telling him todays news last night - I've managed to do that a few times via ATS. Freaks me out how much 'stock' people put into their local news. They attributed todays sizable drop to the bailout package and mentioned nothing of Japan/Russia/or EU. Being informed really is a personal responsibility or rather a quest to get out there and dig on your own to try and uncover the truth - in all forms of information.

I've not contributed much to this thread but have kept a close watchful hourly eye and have enjoyed the banter. Keep up the good work!

WHAT IS THE DOLLAR AND GOLD RALLY TELLING US?

Capital flight has driven the US dollar higher. On a day when President Obama signed the Economic Stimulus Package into law, the banking turmoil in Europe and the resignation of Japan’s Finance Minister has turned investors away from other major currencies. Even though the greenback is yielding next to nothing, investors are willing to park their money with the US government as long as they keep it safe. The lack of negative game changing news from the US has been very positive for the US dollar. The greenback and gold prices have been moving in tandem since January 14th. This unusual correlation is actually sending a strong message to currency traders.

The Dollar and Gold Rally

It is not very often that we see the US dollar and gold prices move in the same direction. Since gold is priced in dollars, the value of the yellow metal tends to fall when the dollar rises and rise when the dollar falls. However this has not been the case since January 14th as the rally in the US dollar corresponds with the rise in gold prices, which closed today at a 7 month high of $970 an ounce. The last time we saw this traditionally negative correlation turn into a positive one was in 1982. At that time, recession hit many countries including the US. Although the rise in gold prices can be partially attributed to future inflation problems, the cohesive movement in the value of gold and the US dollar suggests that central banks around the world are losing credibility. There are growing concerns that a time bomb could explode in Europe leading to more troubles for the region as a whole. If that is the case, there may not be any safer form of investment than gold. The rally in the US dollar and gold is telling the market that investors are worried about global economic stability outside of the US and therefore they are preparing for the worst.

FX360

Best explanation so far.

I guess this is a luxury that the US afford when they have a fiat currency...
What I found interesting is that when Governments do a direct currency swap with the US they are forced into making payments based on a adjustable interest rate...
If, for any reason, the dollar were to plummet, these people making these moves would lose everything.
HMMM...
Then they would just devalue Gold after everyone has sold off of it allowing them to buy it back up cheap after they have ruined everyone moving to gold.

reply to post by Maxit

I don't know if it is of much importance but yesterday 17/Feb on a TV Thai News they were speking about the government and financial institutions in that country buying big amounts of US$ to devaluate their currency. Of course Thailand itself cannot be a major player in this game but.

Good powers of observation on your part.
In fact, MOST of the emerging markets, especially in the Far East, are doing just that. They do that so that they can strengthen their export numbers. In fact, a good deal of the dollar's perceived strength is due to this process.
www.nationmultimedia.com...

At any rate, currency devaluation has emerged as a tempting option for Asian countries to maintain their economic growth. Since the beginning of this year, some countries in the region have seen their currencies substantially weakened. Weaker regional currencies might prompt some to embrace "competitive devaluation". Most of these countries depend on exports and they feel the pressure to weaken their currencies to maintain their price competitiveness amidst the current economic crisis.

Could be far simpler than people here are saying. I skipped some pages so if it was discussed my apologies for being lazy. First a side note:

Strong dollar = cheaper to buy foreign assets than local. Like Chinese goods etc.

This all happening while Clinton is in Asia and the stimulus package just signed today. Could be a concerted effort to repair the economy.

(edit)
I cant seem to find any articles on Asia buying up the dollar in any articles-recent. someone have some sources?

[edit on 18-2-2009 by lordtyp0]

Short time reader (few weeks), first time poster....

I have been reading threads for about 2 weeks now, but this one has engulfed most of my time. It honestly scared the hell out of me last night and I barely slept. I read every word from every response and am truly amazed at what I have learned.

In short, nice to meet you all (kind of), and keep up the super great work!

Well..from last night...to today..I feel a sense of security.
Though due to all the market speculation I'm sure it will change drastically.
The entire article on the positive gain of both dollar and gold was very interesting. I believe we may avoid a critical disruption in our economy because of this. Let us pray.

reply to post by antmax21


i thought that an increase in the dollar's value was a good sign today as well; until i did a bit of investigating. if you are like me (and do not entirely understand the reason for the current economic crisis), i urge you to read the articles on the Great Depression and Black Tuesday on Wikipedia.com. The scenerio sounds all too familiar. Plus, inflating the value of the dollar decreases the buying power of Americans, especially those struggling with unemployment. Devaluation of the dollar is credited with the recovery from the depression.

[edit on 18-2-2009 by supertrot]

Mulitple triggers found in this forex analysis

Eastern Europe triggers rush for safety

Heavy euro selling tripped automatic sell orders planted just below $1.27 and the currency fell more than 1 percent to about $1.2640 , its lowest since early December.

The dollar rose as high as 92.44 yen , its strongest since early January.

Emerging Asian currencies broadly weakened against the dollar.

Asia stocks tumble - source

Korea Bank borrows dollars in swap market

And the icing on the cake - from Today

US - China tensions rise amid financial chaos

Originally posted by supertrot
i thought that an increase in the dollar's value was a good sign today as well; until i did a bit of investigating. if you are like me (and do not entirely understand the reason for the current economic crisis), i urge you to read the articles on the Great Depression and Black Tuesday on Wikipedia.com. The scenerio sounds all too familiar. Plus, inflating the value of the dollar decreases the buying power of Americans, especially those struggling with unemployment. Devaluation of the dollar is credited with the recovery from the depression.

Well Done supertrot! A strong dollar will cause even more deflation here in the US, something that Ben Bernanke is doing everything in his power to avoid.

reply to post by Rockpuck


I have posted a small comment before, but this article confirms what my gov't inside source has told me: the source of the buying is IN THE US! (and this is the first time ever that I have shared inside info with a forum)

Originally posted by BooBetty
reply to post by Rockpuck

 

I have posted a small comment before, but this article confirms what my gov't inside source has told me: the source of the buying is IN THE US! (and this is the first time ever that I have shared inside info with a forum)

Sigh... We've already determined that Denninger was overreacting...and that the numbers and volume don't suggest anything of the sort like he was suggesting...

There's not government conspiracy on this one... seriously... It was Asian markets fleeing asian currency and deciding the USD was more secure...

it was only a slight bump in normal volume, but it was accentuated by the dropping of all other currencies at the same time...

reply to post by nj2day


Yeah but if this continues for along time its bad news for the world. I'm hoping its a short term thing but you never know with the stock markets these days.

So the 'buy American' clause was slipped into the 'stimulus' package, which might, no will, start a trade war with China.

That is just marvelous. It is going to be fun times when they go to buy all those computers and China jacks the price up on them to obscene prices. Not to mention how all the retail stores are going to be effected when the huge corporations are going to have to jack up their prices. Let's not even take into account the high cost of American made goods. Not that I have a problem with buying American just imposing restrictions on what companies can buy right now is not a very good thing.

Looks like Asian markets are going to take a beating tonight. Along with Europe and then of Course America.

reply to post by Hastobemoretolife


Actually DOW futures are up almost 1%... and Hong Kong is in the green by .5% (1% on red chip)

I don't think tomorrow is going to be brutal like today was...

However, i will add the disclaimer... If Czech and Russia take a nose dive... all bets are off lol

I think we'll do OK tomorrow... and make back some of these losses from today.

Originally posted by Tentickles
reply to post by nj2day

 

Yeah but if this continues for along time its bad news for the world. I'm hoping its a short term thing but you never know with the stock markets these days.

LOL yah, my models were destroyed in October... so the market is still rather unpredictable...

I cashed out my stocks in August... as I saw this coming... so I haven't really strived to get good working models back up yet... figured I'd wait till things calmed down...




[edit on 18-2-2009 by nj2day]

reply to post by BooBetty

Dump foreign reserves...incite a run on Asian currencies?

Dollar broke it's downtrend...Treasuries rallied. Are you implying that Bernanke is following through on his remarks about buying the long end?

If so, I like it!

Thanks BooBetty.

GL

reply to post by nj2day

Sigh... We've already determined that Denninger was overreacting.

That man ALWAYS over-reacts... which is why I don't like him. Really rather annoying.. screaming the end is neigh, I open by screens and I see nothing spectacular..

In fact, the only interesting news from all of this is that Gold and the Dollar rose at the same time in conjunction with one another.. which is interesting.

Denninger embarrasses himself once again......... SURPRISE! .. well .. guess not really..