The dollar continued to rally against the euro yesterday.

It reached its highest level against the euro since January, after Jean-Claude Juncker, chairman of eurozone finance ministers, said the single currency was overvalued.

Dan Denning says the dollar rally will continue to push down key commodity prices in the short term. The problem is there’s little to support the dollar’s climb over time.

This makes mining stocks a bargain for the long-term investor.

This from The Daily Reckoning Australia:

In the markets, all the action is in the currencies, which is in turn setting of reactions in oil, gold, and commodities. The U.S. dollar has started to look like the least ugly currency on the market lately. The British pound is reeling under the staggering incompetence of Gordon Brown and Alistair Darling (and Britain’s housing and debt bubbles.).

You know what we think of the greenback over the long haul. But the dollar rally may have some legs, especially if you keep seeing increased political risks in Asian markets (Japan, Thailand, Indonesia). We had lunch with an old colleague yesterday who said it looked like shades of 1998 and the currency crisis, but with a few variations.

What variations? Well, in 1998, the U.S. was coming off a rare (and truth be told fictitious) annual budget surplus. Tax profits were pouring into Federal coffers faster than the Federal government could dole it back out. The dot.com boom was entering its irrational phase, and the dollar looked like a King.

Today, U.S. Federal finances are not nearly so rosy. The government is going to run an annual deficit of nearly half a trillion dollars. But still, in the game of global fiat currency competitive devaluation, other countries are following what the Fed began last year.

The stronger dollar will put a lid on oil and gold, and probably deal a few more kicks to the mining companies, and the morale of resource investors. We wouldn’t be foolhardy and average down. But you should still keep a careful list of good resource projects with excellent mineral deposits. And then try to buy them on sale.

Source: Australian GDP is Doing Better Than the U.S.