USD 02 (Oct 09 - Sep 10)

[kennynah]

since there isnt a Dollar Index thread...i'll park this here..

my technical target for /DX to rise to ~81.20 within next 30 days...currently /DX is at 80.265....

[-dol-]

Yes, I think the US$ is picking up steam. Once it clears K's targets, we may get further acceptance of the US$'s strength - and those resistances further up will seem quite surmountable. The US$'s advance could even accelerate

[LenaHuat]

It's all a question of relative strength, IMHO. The weak Euro and Yen is likely to be the new normal for both this and next year. Furthermore, as the Yuan is pegged to the US$, this would be an indirect strengthening of the Yuan. The US would be delighted

[winston]

Hard Assets For The Road Ahead by John Dobosz

For most of the past decade, and particularly since 2002, the value of the U.S. dollar has been trending lower against major world currencies, and against gold and baskets of many commodities. Even though the dollar has experienced a respectable rally since late last November, its bounce has not changed the long-term downtrend.

Dollar bears argue that low interest rates and an inflationary impulse in Fed policy spell continued weakness in the dollar--if not against other currencies, surely against gold and other commodities. Real estate, despite the horrific crash that precipitated the financial crisis, could also be a place to seek shelter from a tumbling buck.

http://www.forbes.com/2010/02/08/devon- ... ssets.html

[winston]

AAA Credit Rating
S&A Digest

We've been telling our friends for months that sooner or later the U.S. Treasury secretary would come out and publicly say something ridiculous in defense of the U.S. dollar – much like a banana republic's finance minister on the eve of devaluation.

Last weekend, we got our first actual taste... On Sunday, Geithner said the U.S. "will never" lose its triple-A credit rating. Never is a very long time. And if you believe the representative of a bankrupt government, there's a bridge in Brooklyn you should look into buying...

Watching Geithner lie through his teeth reminded me of July 2008, when Fed Chairman Ben Bernanke assured us Fannie Mae and Freddie Mac were "adequately capitalized" and "in no danger of failing." One month earlier, I'd written an issue of my newsletter (Porter Stansberry's Investment Advisory) titled "Freddie Mac and Fannie Mae Are Going to Zero."

I was watching Bernanke's testimony on TV in a hotel room on the 30th floor of the Four Seasons Hotel in Las Vegas. I could literally see more than $100 million worth of bankrupt real estate from my window – more than enough to bankrupt both Fannie and Freddie. As an investor, I had a simple choice to make: I could believe a government bureaucrat, who is in charge of running a paper money system backed by nothing but confidence... or I could believe audited financial statements and my own two eyes. I chose the latter.

More recently, I've been warning investors both our government and our biggest conglomerate (GE) are broke. Moody's seems to agree with me, warning the current deficits are unsustainable. Geithner and Bernanke will undoubtedly beg to differ. However, anyone who has ever paid interest on any debt before is welcome to simply look at the numbers and ask themselves a few basic questions...

How can so few taxpayers be expected to repay more than $20 trillion worth of debt? How can a democracy where most people don't actually pay taxes ever be expected to run a balanced budget? Why would anyone expect America to repay its debts when millions of our consumers and a large number of our biggest companies are going bankrupt?

Source: growthstockwire.com

[winston]

Safety of the Dollar.

With the trouble in Europe, there was a flight to safety in the dollar. That bolstered it and its continued trend to the upside. It was not a runaway move, however, because the dollar has moved into a significant resistance point from the June and July consolidation. It runs from roughly 79 to 81.50.

Intraday, the dollar hit at 80.75 on the high, so it is right in the middle of that range and bouncing. Nonetheless, it put in another good day (1.3618 Euros versus 1.3692 Thursday). During the day, it was down below 1.36 Euros, trading in the 1.35 range. That is significant. 1.36 - 1.38 is the range it has bounced up and down in lately, and that is what the traders are watching.

If it makes a breakout above that, then it has cleared this resistance and we are looking up at 82 - 83 as the next range. 84 is the next serious resistance for the dollar.

Source: MarketFN.com

[-dol-]

US$ strength going according to script so far...


FOREX-Dollar at 8-mth high after Fed discount rate hike

4:12am EST
* Dollar rises versus basket of currencies

* Euro breaks below key technical support

* Fed officials play down surprise move (Adds quote, detail; previous TOKYO)

By Neal Armstrong

LONDON, Feb 19 (Reuters) - The dollar surged across the board on Friday, driving the euro to a nine-month low in the wake of the Federal Reserve's announcement that it would raise the interest rate it charges banks for emergency loans.

The Fed said late on Thursday the discount rate would be increased to 0.75 from 0.50 percent, effective Friday, although it left the benchmark federal funds rate, its main policy tool, unchanged near zero. [ID:nSGE61I036]

Currency markets took the decision as a signal that the U.S. central bank was starting to normalize policy, despite assurances from one Fed policymaker to the contrary.

"Even though this is not an official tightening, it shows that the Fed is at least 'moving'. The Bank of Japan may require more quantitative easing and the ECB cannot change its stance, so that is why the dollar is rallying against the euro and the yen", said Antje Praefcke, currency strategist at Commerzbank.

At 0850 GMT, the dollar was trading up over 1 percent versus a basket of currencies <.DXY> after rallying to an eight- month high of 81.342.

The euro <EUR=D4> hovered close to a nine-month low of $1.3444 versus the dollar hit after a break of key technical support.

Traders said a 61.8 percent Fibonacci retracement of last year's rally from $1.2455 to $1.5145 had been taken out at $1.3485, with a close below this level today opening the way for further losses.

The dollar has been making gains over recent weeks on the back of positive U.S. economic data, while structural problems in the euro zone have weighed on the single currency, prompting a fall of over 10 percent against the greenback since December.

"We continue to favour the dollar and expect that further improvement in US data combined with persistent euro zone sovereign credit concerns will be dollar-supportive," said analysts at UBS in a note.

Against the yen, <JPY=> the dollar rose to highest levels in a month at 92.10 yen, remaining buoyed around the 92.00 level in European dealing.

Technical analysts were eyeing the 200-day moving average as the next resistance level to watch at 92.30.


TIMING

While the timing surprised the market, Fed Chairman Ben Bernanke had said last week the central bank could soon raise the discount rate. He had stressed, however, that the move would not be akin to tightening monetary policy.

St. Louis Federal Reserve Bank President James Bullard said investors belief in high probability of a rise in the Fed's benchmark rate this year was "overblown" and that the discount rate rise should not be seen as a policy signal.

"The Bullard comments are an attempt to calm the markets because the move came as a bit of a surprise, despite what was said in the Fed minutes this week", said Commerzbank's Praefcke.

The Australian dollar extended losses despite hints by Reserve Bank of Australia Governor Glenn Stevens that further interest rate rises were likely. [ID:nSGE61H03Z]

The Aussie fell 0.5 percent to $0.8887 <AUD=D4> and shed 0.7 percent against the yen to 81.63 yen <AUDJPY=R>. It also backed off a decade high against the euro set the previous day.

Sterling also remained under pressure, dropping to a nine-month low of $1.5377 versus the dollar <GBP=D4> as the pound struggled in the wake of Thursday's disappointing public sector finance data. (Additional reporting by Kaori Kaneko; Editing by Mike Peacock)

[winston]

Dollar. Again the dollar was up early, rallying on the Fed raising the Discount Rate. Why?

If it suggested the Fed was closer to raising the FFR, the higher rates would support a stronger dollar. Pre-market the dollar traded to 1.3522 euro. As you know, that 1.36 level is the bottom of the range it has made with 1.38 at the top.

The dollar faded some as the session wore on, and though it closed stronger (1.3606 versus 1.3612 Thursday), the fade was enough to bring stocks back up. It also rose on the Dollar Index as well, but there too it gave back a big upside gap.

Source: MarketFN.com

[millionairemind]

Japan Hoarding Treasuries Counters Retreat by China (Update1)
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By Wes Goodman

Feb. 22 (Bloomberg) -- Lost amid government reports that China reduced its holdings of Treasuries by a record amount in December were data showing Japan increased its stake, a move that may signal U.S. yields are peaking.

Purchases by Fukoku Mutual Life Insurance Co., Mizuho Asset Management Co. and Daiwa SB Investments Ltd. helped push Japan’s holdings to $768.8 billion, an increase of $11.5 billion. U.S. government debt held by China fell $34.2 billion to $755.4 billion, Treasury Department figures showed Feb. 16.

Increased buying from a country that has lived through a decade of recessions and deflation indicates Treasuries are a relative bargain, with consumer prices in check and savings rates rising. Investors in Japan, where households have built up 1,400 trillion yen ($15 trillion) of financial assets, are attracted by U.S. yields that reached the highest since 2007 compared with Japanese government bonds.
http://www.bloomberg.com/apps/news?pid= ... sY3QYkxgR4

[winston]

US Dollar

The dollar struggled on Friday. The dollar was trading in the 1.36-1.38 range, and the dollar rallied sharply last week. When economic times got concerning and there were fears concerning Europe, the dollar rallied.

It is still a safe haven, and it was driven it below 1.36 Euros. It bounced back on Friday (1.3616 Euros versus 1.3554 Thursday).

Against a basket of currencies, it closed flat, but it is still in a nice uptrend. The dollar may come back to test, as it has done periodically, but there is nothing negative with respect to where it is right now.

Indeed, it broke over an important resistance level, tested it, and rallied further last week. The dollar remains strong, rebounding from that long selloff. That is aiding us with respect to inflation because as the dollar strengthens, oil becomes relatively cheaper for the US. We are no longer importing as much inflation with every barrel of oil.

Source: MarketFN.com