Chuck Butler’s Currency Round Up
Jul 9th, 2008 | By Chuck Butler | Category: US Dollar & Forex TradingCanadian loonie bounces with oil… Aussie dollar dip is temporary… Indian rupee on the ropes… Kiwi dollar looking shaky…
The Canadian dollar / loonie, has outperformed all currencies overnight, which is about time! The bounce in Oil prices overnight has boosted the loonie higher… But in reality it’s a small trading range, so don’t get all lathered up just yet!
The Aussie dollar received some not so good economic data last night… Consumer Confidence plunged to a 16 1/2 year low in July, as rising food and fuel prices are hurting the Aussies as well. The data in Australia, which previously, kept pointing to another rate hike by the Reserve Bank of Australia (RBA), has softened in recent prints, and now suggests that the RBA is finished with rate hikes in this cycle… That will cause some softness in the A$, but only while those that were looking for a “quick hit” get out and move to something else… I still believe in the Aussie $ story, and view this as a temporary situation.
The Indian rupee continues to get sold… And this is beginning to get old! I was telling someone yesterday that the flows into India have slowed somewhat, and you had the Reserve Bank selling rupees a couple of months ago to keep it from getting too strong… When you have a Central Bank that demonstrates a willingness to sell their currency, traders and investors can choose to fight them, or go along with the selling… Unfortunately, it looks like the latter of the two choices has been the winner, thus a weaker rupee…
The New Zealand dollar / kiwi has had a difficult time dealing with the fact that the Reserve Bank of New Zealand (RBNZ) has basically called an end to their rate hike cycle… I’ve said this many times in the past, but for new readers it could be a first, so I’ll say it again… Kiwi has had a wonderful, exciting, and most profitable run for the last 6 years, but as the currency was being bought because of the high interest rates that could be had there, the country’s Trade Deficit was rising… The Trade Deficit has run well over 7% of GDP for a couple of years now, but as long as interest rates were high, the kiwi benefited… But now, if interest rates aren’t going higher any more, or maybe even lowered, the Trade Deficit comes front and center, and is no longer swept under the rug… Be careful here…
Source: Fighting Deflation Instead of Inflation?
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Chuck Butler, is the author of The Daily Pfennig, which is republished at The Daily Reckoning. His respected analysis is frequently quoted in or referenced by: the Wall Street Journal, U.S. News and World Report, CBS Market Watch, USA Today, CNNfn, the Chicago Tribune and many other publications.
