The Bias To Buy Dollars Remains In Place...
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In This Issue..

* The dollar continues to get bought...                              
* The A$ gets rocked!                                   
* Riksbank keeps rates unchanged...                                         
* 10-year yields inch higher once again...                                                                                                  

And Now... Today's Pfennig!

The Bias To Buy Dollars Remains In Place...                                     

Good day... And a Wonderful Wednesday to you! The end of the line, so-to-speak for me until after Christmas, as I begin my winter vacation tomorrow. Yesterday, I told you about having a conversation with one of my fave economists on Monday night. Well, she told me that she was worried about me. That when she reads the Pfennig, I sound like I'm too stressed out, and taking this stuff to personally. She said she was afraid I was going to have a heart attack writing the Pfennig one day!

WOW! OK... So here's the deal today, my last Pfennig before Christmas... I'm not going to talk about the deficit spending fools in Washington D.C., I'm not going to talk about the national debt, I'm not going to talk about anything that gets my feathers ruffled... It's all seashells and balloons for yours truly today!

Shoot Rudy! What can I talk about then? Oh well, I can talk about the facts, and just not get into my opinions about the dolts, and so on, right?

OK, here we go! The bias to buy dollars is still prevalent in the currency markets this morning, after seeing the dollar rise a bit, and then give it back yesterday and in the overnight markets. I'm seeing quite a few writers change horses in the middle of the stream and now believe that the dollar is showing signs of a trend reversal...

I'm not in that crowd, that is, unless we're just talking about a short-term trend reversal...

The Aussie dollar (A$) is the worst performer overnight, falling below the 90-cent level for the first time in a while... The minutes from the last Reserve Bank of Australia (RBA) meeting that I talked about yesterday, are really gaining traction on the markets' perception of the future for Aussie interest rates... Most observers now believe that the RBA will pause  at their next meeting in February... Geez Louise, you mean to tell me we have to go 6 more weeks of listening to talk about the RBA pausing? That's not going to be good for the A$ folks... 6 weeks of getting hammered on talk... Now, I'm not one to say the markets are wrong here, for the RBA may just pause in 6 weeks... But, the thing that I don't understand is how strongly the A$ investors have reacted... Doesn't the A$ still have 300 BPS (3%) yield differential to the U.S., Japan, and anyone else that cut interest rates to the bone? I thought so!

Speaking of cutting interest rates to the bone, Sweden's Riksbank met this morning, and decided to keep rates unchanged, as suspected by me earlier this week, at 25 BPS... Or 1/4%... That's just insane folks... But, hey, this is the "good Chuck", I'm not going to pass on opinions of the Riksbank for keeping interest rates that low.

I'm waiting to hear about Norway's Norges Bank, that is meeting as I type my fingers to the bone! Like I said on our Marvelous Monday, most people / observers believe the Norges Bank will keep rates unchanged, but I'm still keeping a light on my belief that the Norges Bank could very well hike rates once again to follow up on their previous rate hike of 25 BPS, given at that time I was hoping for a 50 BPS hike, but only got 25 BPS...

Maybe they'll announce before I sign off today... If not, Chris Gaffney, my hockey loving good friend of 20 years, will talk to you about it tomorrow...

There is a story this morning that Petroleum Investment in the world's sixth-biggest oil exporter (NORWAY!) will decline 1.4% next year... Of course this is a forecast, so they don't really know for sure... I also read something interesting, that Oil producers need oil to cost no less than $70 a barrel to turn a profit. The cost of getting Oil out of the ground has skyrocketed in the past couple of years...

So... Like the Canadian dollar / loonie, the Norwegian krone's fortunes just may be tied to the price of Oil... For we have seen the loonie rise along with Oil prices, and fall along with Oil prices... So... There's something for us to watch and key our investments on in 2010... Oil prices... And the loonie and krone... Good news for these two... And for the Oil producers... Oil has jumped up $2 to $71.41...

Gold is up this morning $8... But that hardly begins to scratch out the losses Gold has taken in the past 10 days... I look at that, and simply see cheaper levels to buy... That's it... I do not see a trend reversal in the shiny metal, I do not see a huge correction back to $950, or anything like that... I simply see cheaper levels to buy...

Don't know if you've noticed or not, but the Chinese renminbi has been ticking weaker VS the dollar since the President made his visit to China to "nudge" them toward allowing their currency to get stronger VS the dollar... I find this to be quite interesting, don't you? Ok, maybe I'm just one of those people that prefer to have people take care of their own back yard, and not be looking into their neighbor's back yard...

So... The Fed's FOMC meets today, and will talk to us this afternoon, spreading the good word, and knowledge on us that they are keeping interest rates at near zero for some time to come... Maybe this will smack the dollar bulls in the forehead, they'll have a V-8 moment, and figure out they were buying dollars all this week because they thought the Fed was going to move aggressively higher sooner than previously thought... But I doubt it... Those dollar bulls are like persistent little buggers!

Besides the FOMC announcement this afternoon, we will also see the stupid CPI print for November, and the 3rd QTR Current Account Deficit, which is expected to be $107.5 Billion, up from the 2nd QTR's $98.8 Billion... Housing Starts and Building Permits also print today... So, we're chock-full-o-data today!

Remember earlier this week I told you about how retailers in Brazil were forecasting the best Christmas shopping season in quite a long time? Well, the hard data  is in, and Retail Sales in October were up 8.4%... So, if October is any indication of the Christmas shopping season, the retailers will be bang on!

So... Like I said, Retail Sales in Brazil jumped 8.4% in October... I certainly hope the Brazilian Central Bank is taking notice... For Retail Sales figures like that, certainly indicate or suggest that inflation is on the rise... And if the Central Bank is taking notice, one would think that interest rates in Brazil would be heading higher in 2010!

Then there was this... Don't know if you've been keeping score at home or not, but the yield on the 10-year Treasury is on the rise again, creeping up inch-by-inch each day, to today's level of 3.57%... Each time this yield has gotten above 3.60%, it mysteriously goes back down, as if there was a renewed interest in buying the 10-year Treasury, that just fell out of the sky! Now, I'm not accusing the Gov't of any shenanigans, not today, I'm not! But doesn't it make you wonder? Doesn't it make you think that there is more to this than it just being a co-in-q-dink?

To recap... Chuck's being nice today... The bias to buy dollars remains in the markets, and has led some to believe this might well be a trend reversal... Of course we've seen this before, only to have the dollar bulls disappointed... The A$ is the worst performer of night, as GDP wasn't as strong as forecast, and the talk of a RBA pause at their next meeting is making the rounds, putting pressure on the A$...

Currencies today 12/16/09: American Style: A$ .90, kiwi .7195, C$ .9430, euro 1.4565, sterling 1.6350, Swiss .9640, European Style: rand 7.3625, krone 5.78, SEK 7.1430, forint 189.75, zloty 2.87, koruna 17.9840, RUB 30.25, yen 89.60, sing 1.3945, HKD 7.7535, INR 46.65, China 6.8280, pesos 12.70, BRL 7.7525, dollar index 76.73, Oil $71.41, 10-year 3.57%, Silver $17.51, and Gold... $1,133.30

That's it for today, and for me until after Christmas! I have two videos to due today, so I wore one of my Christmas ties, with Santa Claus on it! Tomorrow is my long time friend and colleague, Jennifer's birthday... We started working together when she was just out of college... I won't tell you how long ago that was for she would let me have it if I did! Where has the time gone? Friday is the annual "guys shopping day" with my good friends, and Saturday is the Annual Butler Christmas Party... One thing that has always been important to me is be with family and friends at this time of year... The year goes by so fast, that to stop and enjoy our lives is important... With that said, I'll leave you with a line that I've put in the Pfennig, the Review & Focus, and now my Currency Capitalist each December...

May the light of faith, the warm of heart, and the love of family be your gifts this year...

Your loving the Christmas season friend...

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 12-16-2009 9:25 AM by Chuck Butler