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  • Deleveraging pushes the US$ up...

    * Deleveraging continues to push $ higher... * Pound Sterling tumbles... * Canada cuts rates... * Argentina spoils appetite for emerging markets... ** Deleveraging pushes the US$ up... Good day... Wow, another unbelievable day/night in the currency markets. The dollar continued to run up vs. most of the currencies yesterday and last night as investors brought money back into the US. We continue to get calls from WorldMarket investors asking us what was pushing this dollar up, as all of the data seems to be negative for the US$. The only explanation which seems to make sense is the global deleveraging of investors. Here is as good an explanation as I can give. Over the past several years money was extremely cheap and investors took advantage of these cheap loans. Hedge funds, corporate investors, and even some individuals borrowed funds and placed them into higher yielding investments to earn the 'carry'. This occurred not only in the currency markets, but across the entire spectrum of asset classes. These investors were rewarded with incremental yields over 'cash' investors, and banks were more than willing to lend, so the amount of leverage continued to increase to absolutely absurd levels. Everything was fine until the housing market here in the US turned and losses started to show up on the books of some investors....