Monday, November 9, 2009

US Dollar Under the Bus

While I was trying to recuperate from a flu over the weekend, Nancy Pelosi did a sneak attack and passed her monstrosity known as "Affordable Health Care for America Act of 2009", or H.R. 3962 (in my mind, the health care deform) on Saturday night. (I'm sure it's a bargain for $30,000 per uninsured person.) Then, as if to prevent the stock market from tanking on Monday (Pelosi's deform will cost fortune for the rest of us; she doesn't care, she's one of multi-millionaires in Congress), G20 pledged to keep stimulus in place to prop up the global economy.

As the result, U.S. dollar was thrown under the bus. Oh for the good of the world, no doubt. Dollar carry trades in various forms (such as issuing U.S. dollar-denominated sovereign debt, for example) just got started.

The next support comes around 72 on the U.S. dollar index (DXY), which tracks a basket of currencies (Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, Swiss Franc) against the dollar. The last time the dollar index was in the 72 range was March - July 2008. Below that level, the currency will boldly go where no one has gone before. The area around 72 is the multi-decade low. (Remember this chart?)

The U.S. stock market cheers. Dow Jones Industrial Average is up 151 to 10,175, S&P500 up 16 to 1,086, Nasdaq up 30 to 2,143 as of 12:09 EST. What will Little Timmy and Big Ben do next?


Post a Comment