Jack Crooks is editor of World Currency Options, and a contributor to the World Currency Watch blog. Jack is a seasoned investment adviser, who has held key positions in brokerage, money management, trading, and research. He is the founder of Black Swan Capital, a currency advisory and management firm, and of Ross International Asset Management.
The dollar has taken a tumble from its near a three-week high against the euro, after traders got a return of the jitters over crisis in the US credit markets.
No surprise there. What is surprising, says currency expert Jack Crooks, is that the dollar appears to be becoming less correlated with the price of crude oil. The US currency, after all, didn’t hit all-time lows when crude soared to above $150 per barrel.
In fact, the dollar index rallied from its all-time low when crude was around $104 a barrel as oil prices began their steep climb. Jack says there are three possible explanations…
Sometimes the most interesting remarks don’t come from the pundits or the floating talking heads on CNBC. Instead, the really intriguing insights come from normal investors like you and me, who aren’t afraid to tell it like it is.
The machinations of the US Federal Reserve are uppermost in the minds of investors — and the media. The Fed is in a jam. On the one side slowing growth and the specter of the credit crisis. Rising inflation on the other.
You can’t deny 2007 was the year of living dangerously in financial markets. So far this losing streak has continued through the first quarter—with the notable exception of soaring commodity markets!
You’ve probably heard the talking heads on CNBC chattering about this currency play. You’ve probably read about this investment “unwinding” or “being back on” in the Wall Street Journal, or in Bloomberg.
As the U.S. dollar weakens, everyone from the professional economist to the average consumer is wondering what exactly are going to be the repercussions both domestically and internationally.
Analysts are seeing many similarities between the scenarios leading to the collapse of the Yen carry trade back in 1998 and what is occurring now. Should those investors and funds reliant on currency trading be paying closer attention?
In short, the dollar may be playing an unusually large role in its impact on the fundamentals at this point. In other words, everyone is bearish on the buck, so it’s dropping. And maybe that’s a bit more justification for the central banks to intervene to prop up the dollar.
The yen can provide a key hedge in a world which consists of continuous intermittent bouts of unwinding leverage. But, I do think the Fed’s recent actions during the Bear Stearns affair helped bring a modicum of confidence back to the credit markets.