Like most commentators I have run out of adjectives to describe the state of the dollar which has managed to fall to all time lows against the euro, yen and swiss franc. This extraordinary slide has prompted currency strategists at both Goldman Sachs and Morgan Stanley to place the dollar on “intervention watch” as central banks may now start to take action to halt this decline.
The rush into commodities, the likelihood of recession, hedge funds collapsing, Bear Stearns on the brink of meltdown and the Fed meeting on Tuesday are all adding to the firestorm besetting the dollar. The market is equally divided between those who believe we are witnessing the final, extreme phase of a sell off for the dollar before it begins to recover, in particular against the euro, and those who believe we are on the brink of an even bigger sell off by the dollar peg economies in Asia and the Middle East.
My own view is that central banks cannot afford to continue to watch commodity prices such as oil and wheat continue to rise at such an alarming rate and thereby adding to inflation so will attempt some kind of covert (or even overt) action to shake out the dollar speculators.
My recommendations for next week are for vigilance and extreme care as we are in for a very bumpy ride.
Hi Anna:
Sunday night in the US and JPM just acquired BCS for $2/share down from only +$50 just 2 days earlier. Somehow the Black Swan event (once in a lifetime) that crushed all these quant funds in the Aug. of 07 market drop is turning into a flock of Black Swans. Well the only stocks I own to date are less than $1 (known loss) and the rest is in US currency (yelp!). You know the saying that cash is King during troubled times; Well Kings do dethrone. Now if one could pick a currency as the heir apparent to the soon to be vacated throne what would that be?
Interesting times.
March 17th, 2008 at 5:04 am