Dollar Sinks
Apr 22nd, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar gave up last week’s gains against the euro. Late Monday, the euro was trading at $1.5913 vs. $1.5804 on Friday.
Last week, Citibank’s woes inexplicably pushed the buck higher, but that was not the case yesterday. When Bank of America reported that first-quarter profit fell 77% and credit-loss provisions jumped $4.78 billion, the market decided it was hearing bad news.
Are traders coming to terms with reality? Ashraf Laidi, of CMC Markets US, thinks so.
“Last week’s strong earnings were largely a reflection of relatively robust foreign demand and of the weak U.S. dollar. In the event that equities continue to rally simply on the notion that the ‘worst is behind us,’ they will risk diverging with the stark macroeconomic reality that is highlighted by soaring energy costs and rising unemployment,” Laidi wrote.
For its part, the euro got a boost when European Central Bank Governing Council member Axel Weber said that inflation is likely to remain elevated and hinted that the ECB might have to hike rates.
However, with the euro “so far unable to post new record highs, and the market seen as a bit overextended on the long side of the ledger currently, downside potential may be on the rise in the near term,” wrote currency analysts at Action Economics.
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.