Dec

16

Test of Currency Makers, from Anatoly Veltman

December 16, 2008 |

11 Comments so far

1. jamshed nazar on December 17, 2008 5:58 am

   US seems to have all the stars lined up for the dollar’s demise,

   Large trade defict
   Massive fiscal defict
   Ballooing FED balance sheet
   Internal constraints for US’s creditors like China, ME

   The positives for the US currency are its huge reserve status of 65% plus and deleveraging / repatriation of dollars from foreign markets and unwinding of commodity bets

   However, the reserve currency status for dollar is on the demise accompanied by a rise in the Euro’s status. On the horizon, Renminbi is also coming up as a possible reserve currency.

   Whatever happens in the short term, there is no way that the dollar can escape similar punishment that the pound is witnessing at this time. However, the housing crisis is not as bad in US as it is in UK. But the US housing crisis has been mishandled resulting in global effects.

   Why would the FED not backup agency loans for a year at, lets say, 4% for 30 years, to cleap up the glut of new houses and the government provide tax incentives to expense principal + interest for these loans for lets say nextg five years. This should have been done six months ago… and we would have avoided all this TARP crap.

   Technicals are great but technicals do not tell you when massive reversals occur….and why

2. glenn on December 17, 2008 6:42 am

   BOJ: trader talk intervention here and now at 88 levels then again around 80-79.75 arena,, have not seen the fast a furious upside to this so still short USD/YEN from around 93 levels covered on some fake out but got right back in again. looks like only game in town at moment.. g

3. Anatoly Veltman on December 17, 2008 9:07 am

   So FOMC blew expectations out of the water: basically pledging to back-stop everything and anything + taking Central Bank rate closer to zero sooner than expected! Currency markets hinted strong trend: with Swiss Franc rising seven straight days and breaching major trendline in the hours prior to the announcement!

   The aftermath: EUR/USD blew through 38.2% retracement and stopped dead at 50% of 2008 1.2335-1.6040 range!

   EUR/GBP sliced through previous 0.9020 record and struddles 0.9200 as we speak.

   Treasury yields are keeping up their unbelievable month-long run, with long rates now exploring the nirvana of newly-discovered 250 basis-point room to zero-rate!! Just because prompt paper yields zero - should players be over-reaching for yield that aggressively?? A typical trap in my book; but trends are so hard to resist before New Year! Open Interest this morning sports unusual of late jump across all Treasury maturities!

   And finally: Open Interest in bigSP diverged from E-mini’s. It didn’t rise - E-mini’s and Treasuries notwithstanding, and unusual for pre-expiry!

4. Matt on December 17, 2008 8:20 pm

   Re:jamshed…Here are two more positives:
   The US debt is in its own currency.
   The US economy is very dynamic, as the Dollar falls vs major currencies, US manufacturing becomes very competitive and puts a break on further Dollar declines.
   The “dead” Dollar story looks to obvious, that makes me question it.

5. jamshed nazar on December 18, 2008 8:48 am

   There is a prevailing view that the dollar crash is just a year end volatilty fed overshoot in thin markets.
   I checked 1m, 3m, 12m forecasts from 29 leading banks and fx firms about a month ago. The highest 12m forecast was for 1.45 to the euro. Only 6 in 29 forecasters predicted 1.30+ eurusd in one 1m. This view is terrible.

   The dollar problem and the US economy problem is real.
   Yes, the FED can print money and people need to understand that it is doing exactly that… the market will be flooding in dollars pretty soon. The Obama party will soon be over..atleast for the short term.

   What I like in the Obama program is only long term - triggering new innovation cycles for the US economy - new cars, new energy initiatives, new urban infrastructure, innovations in medicine etc…. the government will jump start the innovation process which will lead to new industries and ultimately provide value added revenue for the new amercian economy.

   everything that the chinease can make.. becomes dead business (just an extreme statement). America needs to go back to a leadership role in high tech and that is its only prescription to command economic and financial leadership also.

   In the short term, there is not much amercian to sell aronud the world, and to be the net debtors of the world is not a pretty state to be in. the US economy needs to undergo serious structural adjustments and that means …ultimately a fallnig dollar.

   My year 2009 forecast for EURUSD is 1.8 to 2.0. This has not changed in the last six months….

6. Anonymous on December 18, 2008 6:29 pm

   “The dollar problem and the US economy problem is real.
   Yes, the FED can print money and people need to understand that it is doing exactly that… the market will be flooding in dollars pretty soon. ”

   Is it really a dollar problem? Or is it the start of competitive devaluation across the globe? Look around and you will find plenty of signs of competitive devaluation. The Europeans are once again behind the curve just as they were several months ago. Time will tell if they are right, but the demise of the British Pound in exchange for the adoption of the Euro seems a much more plausible event than a US Dollar collapse at this juncture.

7. Anatoly Veltman on December 18, 2008 11:03 pm

   May I ask:

   1. What's the purpose of keeping name "Anonymous"?

   2. What can anyone learn from "Time will tell if they are right"?

   3. Kindly explain why should one be short British Pound at its current price?

8. Anonymous on December 19, 2008 9:15 am

   No problem Anatoly.
   1. What’s the purpose of keeping name “Anonymous”?
   I ask you…what is the purpose of giving a real name in a virtual world? Will it make my words more credible or is just because you can Google it in order to find some facts to discredit my words? At this day and age, you should know that it is fairly simple to associate a real name with an address and then obtain much more personal information than you can possibly imagine. One can even see your house and the car parked at your driveway from Google Earth.

   2. What can anyone learn from “Time will tell if “they” are right”?
   Take these words as you may. If you cannot learn anything from it then simply disregard it.

   3. Kindly explain WHY should one be short British Pound at its current price?
   Please point to me in my post where I said to SHORT the British Pound and AT ITS CURRENT PRICE.

9. Anatoly Veltman on December 19, 2008 2:34 pm

   “the demise of the British Pound in exchange for the adoption of the Euro seems a much more plausible…” surely sounded to me like a Bearish call (EUR/GBP was trading just off of 0.9500 and fourteenth(!) straight up-day at the time of YOUR writing)

10. Anonymous on December 19, 2008 3:47 pm

    Anatoly,
    let me make this as clear as possible. Tell me where in the post and in the words that you have quoted, did I say "short British Pound at its current price."

    You see, this is not a problem of comprehension. It is an attitude problem where you try to distort words that fits one's agenda.

11. Anatoly Veltman on December 19, 2008 6:14 pm

    I was trying to distill a useful market idea from your post — but I failed