Traders Fear Chinese ‘Bubbles’

The big story on the screens this morning comes to us from China where inflation has reached a 16 month high. These dramatic headlines have sent currency investors heading back to the Japanese yen and US$ as many of these stories suggest the Chinese will be stepping in to slow the Chinese economy. But if you look beyond the ‘16 month high’ headlines, you will find that consumer prices rose just 2.7% in February from a year earlier, and increase yes, but hardly the stuff of a ‘bubble economy’. Premier Wen Jiabo has stated a goal of keeping inflation around 3%, so the inflation number is still below his goal. And the Chinese have already started pulling liquidity out of the Chinese banking system with increases in the reserve requirements and internal interest rates.

Strong Chinese Exports Cause Aussie Dollar to Soar

Yesterday’s price action in the currencies versus the dollar was a drag, man… We did, however, see the higher yielding currencies begin to move away from the pack of currencies led by the euro (EUR). That move higher by the likes of Australia (AUD), Brazil (BRL), South Africa (ZAR), and others, carried over through the overnight sessions, so, as we start today, they are stronger versus the dollar… In fact, the Aussie dollar is near a 7-week high this morning.

US Credit Rating: Who Will be the First to Downgrade?

During World War II, there was a saying, that, “loose lips, sink ships”… I think Greek Prime Minister, George Papandreou, should have taken those words to heart yesterday… You see, the currencies, led by the beleaguered euro (EUR), were rallying, and the single unit was nearing 1.37, when Papandreou made a statement that sunk the rally’s ship… He said, “Greece’s debt problems could soon spread to the rest of Europe and mean a weaker euro”

European Monetary Fund: You Heard it Here First

Well… After a couple of weeks of waiting, and wondering if it was going to print or not… There was a very nice article in The Wall Street Journal on Saturday that featured… Me! And my Pfennig! I’m sure that most of you missed it, so if by chance you would want to read what Jeff Opdyke had to say about me and the Pfennig… Click here.

Deutsche Bank Rating Downgraded

All the euphoria about the end of the euro (EUR) selling got deep-sixed yesterday on two counts… 1. The European Central Bank (ECB) decided to extend stimulus measures, which led the markets to believe that the ECB would remain on hold with their interest rates, and once again, the markets believed that the US would begin to raise rates before the ECB… 2. Moody’s downgraded Deutsche Bank (Germany’s largest bank).

Greek Spending Cuts Lead to Civil Unrest

What a day the currencies had yesterday! The euro (EUR) gained ground all the way back to 1.3730 (but saw some profit taking at the end of the day) and all the other currencies followed in step… Now… There’s two ways to look at this… Either the euro is like a star that’s getting ready to burn out… (It always shines brightest before it burns out), or… It’s like a star that had been covered up by another planet, and is coming back into view!

Shorting the Euro: A Good Bet if Not for the DOJ

Every crisis comes with political baggage. This morning, the US Justice Department is said to be “requesting” that certain hedge funds reveal their bets against the euro.

Under pressure from their EU counterparts, say rumors making their way around the Internet, the Department of Justice is tracking down fund managers who attended a particular dinner in February hosted by Monness, Crespi, Hardt & Co., a NYC brokerage firm. The managers there supposedly discussed taking short positions in the euro and in US banks while going long the Canadian dollar…all fantastic trading ideas, if you ask us.

GDP and Dollar Growth: It’s All Happening in Australia

I have to say front and center this morning, that while it may have taken the currency traders half a day to realize that Australia had raised rates, they finally began pushing the Aussie dollar (AUD) higher versus the green/peachback. I was beginning to think that I would have egg all over my face again, when the Aussie dollar didn’t respond right away… But it was all right on the night.

US Traders Dislike Greek Bailout Package

Well, it didn’t take long for me to get the emails started telling me how wrong I am, again… WOW! Of course, I wonder where these people have been the last nine years, as when nine years ago I was the first writer to issue a whitepaper calling for the long-term downtrend for the dollar… Or, in 2002, when everyone was writing off the euro (EUR), I wrote the whitepaper, “The Year of the Euro”… Or in, 2005, when everyone called for the collapse of the euro… But not me… Or, in 2008, when everyone called for the collapse of the euro… But not me…

Canadian Dollar More than Just a Commodity Currency

I like the Canadian dollar (CAD) more and more. It has some fundamentals that are definitely improving, and some other aspects that are definitely worth considering. Here’s why…

Traditionally, the loonie has been linked with the Australian (AUD) and New Zealand dollars (NZD). Now in the current market, currencies are often linked together by at least one of three elements: They either produce a high yield, they are commodity-based or they are funding currencies for a carry trade.

The Greek Debt Fallout

Greece, already laden with so much debt it can’t afford, has delayed its latest bond sale roadshow for US and Asian investors with no rescheduled date offered. Their sovereign debt problem has yet to improve.

A long hopeless-feeling struggle could remind you of Homer’s Trojan War. The Greeks spent ten long years failing to siege Troy before they decided to get creative. They erected a horse statue, pretended it was a gift, and used it to sneak enough soldiers inside to open the gates and ultimately destroy the city.

US Jobless Numbers: A Lag in a Lagging Indicator?

The markets didn’t hold any real surprises yesterday as they continued to trade in a narrow range throughout the trading day. Overnight, the Asian markets sold the dollar, as good economic data from Japan and some promising data out of Australia convinced traders the global economic recovery is still underway. While Europe and the US continue to focus on the debt crisis in Greece, the Asian region continues to perk up. But I’m getting ahead of myself; let me get back to what happened in the markets yesterday.