Dollar Advances, Positive Sentiment Over?

The US dollar gained today as concerns and uncertainty slowly return to the Forex market and demand for the protection by the safe currencies may again emerge. It’s early to say with certainty that the greenback will rally again as the positive mood hasn’t yen gone completely from markets.

The optimism about the future of Europe hasn’t quite waned and still puts a downward pressure on the dollar. The United States showed a positive set of fundamental data and that supported the optimism. The US manufacturing PMI advanced from 50.8 to 52.7 in November. The construction spending rose 0.8 percent in October, compared to the median forecast of 0.4 percent.

The outlook for the global economy and the European economy in particular isn’t universally good. And there are reasons to be worried. The US unemployment claims increased from 396,000

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Week of Risk Aversion Was Moderately Good for US Dollar

This week was good for the US dollar as risk aversion sentiment caused by the problems in Europe increased demand for safety of the US currency. The end of the week, though, was marked by return of risk appetite, reducing gains of the greenback.

The week had the same issue at the forefront as the couple of the previous weeks — the European debt crisis. Perhaps, as in the previous year, market participants would become bored with Europe’s story that doesn’t seem to move anywhere and would turn their attention to other issues of the world economy. For now, though, the main market driver remains the same.

The first half of the week was positive for the dollar as Greece and Italy were plagued by uncertainty about their political future. By the end of the week tensions subsided on the s

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Commodity Currencies Trade Higher than the U.S. Dollar

Commodity currencies are trading near highs against the U.S. dollar today as concerns about what’s next for the U.S. debt ceiling dominate financial markets.

Indeed, the Aussie, loonie and kiwi are all trading high against the U.S. dollar as investors turn to gold, oil and other commodities that generally do well when the U.S. dollar is lower. These commodity currencies receive support from higher commodity prices.

With a U.S. debt default becoming a possibility, many investors are bracing themselves for what could be next: Another global financial crisis and a possible U.S. dollar crash. 

Has the US Dollar Hit Bottom?

In April, I declared that the dollar would rally when QE2 ended. That date – June 30 – is now only a few weeks away, which means it won’t be long before we know whether I was right. Meanwhile, the dollar is close to pre-credit crisis levels on a composite basis, and has already fallen to record lows against a handful of specific currencies. In other words, it’s now do-or-die for the dollar.

Since my last update, a number of things have happened. Commodity prices have continued to rise, and inflation has ticked up slightly. Meanwhile, GDP growth has moderated, the unemployment rate has stagnated at 9%, and the S&P has fallen slightly as investors brace for the possibility of an economic downturn. Finally

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New Zealand Dollar: Come Back to Earth!

In March, I wondered aloud about whether the New Zealand Dollar might be the most overvalued currency in the world. Since then, it has continued its unlikely ascent, rising 10% on a correlation-weighted basis and 3% against the US Dollar, hitting a 26-year high in the process. While there are signs that the New Zealand economy might be able to withstand an expensive currency, at some point, the chickens must come back to roost.

Surely the expensive kiwi must be wreaking havoc on the New Zealand dollar? “How is New Zealand supposed to rebalance its economy away from consumption, importing, borrowing and asset selling towards investment, production, exporting and asset buying when our currency is headed for record highs?” Wonders one commentator. In

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Euro Bounces a Bit, But Still Weak Against the U.S. Dollar

The euro bounced a bit in forex trading on the currency market earlier, but is still weak against the U.S. dollar. Indeed, right now, the greenback is getting support in currency trading as commodities drop. High beta currencies like the euro are down, and commodity currencies like the Canadian dollar, are lower.

Euro is also weak as concerns about the sovereign debt issues in euro zone countries continues to draw eyes. Even though the situation in the U.S. might be seen as equally dire, there is a lot of focus on the situation in Europe.

Long term, many expect that the euro will rebound, but that remains to be seen. Speculation about the euro zone is running wild, with rumors about Greek debt restructuring, to the country pulling out of the currency union, to the dissolution of the euro altogether all part of the discussion.

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Economic Theory Implies Canadian Dollar will Fall

Sometimes I wonder if I’m living in the clouds. All of my recent reports on the Canadian dollar were twinged with pessimism, and I argued that it would only be a matter of time before reality caught up with theory. While the continued surge in commodities prices has confounded everyone’s expectations, other economic trends continue to work against Canada. In other words, I think that there is still a strong argument to be made for shorting the loonie.

To be sure, the rally in commodities prices has been incredible- nearly 50% in less than a year! Oil prices are surging, gold prices just touched a record high, and a string of natural disasters have driven prices for agricultural staples to stratospheric levels. Giv

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