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FOMC Instant Insight: Are the Doves Still in Control?

The lack of any major changes to the April FOMC statement indicates that the doves remain in control for the time being. We will have to wait for Bernanke’s press conference for confirmation. The Federal Reserve acknowledged that inflation has picked up in recent months, but they still believe that the rise in prices will be temporary. This conviction has hurt the dollar because it suggests that the central bank believes the risks posed by higher commodity prices overshadow the impact that it will have on inflation expectations. The central bank’s assessment of the economy remained virtually unchanged with the only adjustment being that they now believe the economic recovery is proceeding at a moderate pace. Read more text…

New Zealand Dollar Rises, Signaling Carry Trade Return

The New Zealand dollar reached a new a new 3-year high against the greenback today and appreciated against the Japanese yen, showing that the carry trade tendencies are growing stronger now.

The kiwi (as the NZD is often called) rose against its major counterparts before some major macroeconomic releases will be reported tomorrow, including April business confidence and money supply data for March. The currency is demonstrating 11.8 percent gain versus the US dollar and 16.4 percent against the Japanese yen since March 17.

The carry trade strategy, which involves buying high-yielding currencies (NZD, AUD) using the cheaper ones (JPY, USD), is now quite evident. Market analysts t

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Economic Theory Implies Canadian Dollar will Fall

Sometimes I wonder if I’m living in the clouds. All of my recent reports on the Canadian dollar were twinged with pessimism, and I argued that it would only be a matter of time before reality caught up with theory. While the continued surge in commodities prices has confounded everyone’s expectations, other economic trends continue to work against Canada. In other words, I think that there is still a strong argument to be made for shorting the loonie.

To be sure, the rally in commodities prices has been incredible- nearly 50% in less than a year! Oil prices are surging, gold prices just touched a record high, and a string of natural disasters have driven prices for agricultural staples to stratospheric levels. Giv

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Forex Markets Focus on Central Banks

Over the last year and increasingly over the last few months, Central Banks around the world have taken center stage in currency markets. First, came the ignition of the currency war and the consequent volley of forex interventions. Then came the prospect of monetary tightening and the unwinding of quantitative easing measures. As if that wasn’t enough to keep them busy, Central Banks have been forced to assume more prominent roles in regulating financial markets and drafting economic policy. With so much to do, perhaps it’s no wonder that Jean-Claude Trichet, head of the ECB, will leave his post at the end of this year!

The currency wars may have subsided, but they haven’t ended. On bo

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USD: An Opportunity To Reevaluate Positions

It has been a topsy-turvy day in the foreign exchange market with the dollar selling off against all of the major currencies. The weakness of the greenback was so pronounced that it reached fresh year to date lows against everything except for the Japanese Yen. Although the dollar remained weak against the British pound, Yen, Australian and New Zealand dollars, it recovered a large part of its losses against the euro, Swiss Franc and Canadian dollar. In fact, the reversal in the euro was so strong that many investors are wondering whether this will mark the top in the currency. Given the holiday in the U.S., U.K. and Japan tomorrow and the small but realistic risk of Greek restructuring surprises over the weekend or some type of policy change from the People’s Bank of China, profit taking has certainly contributed to the reversals. Whether or not the move becomes a more significant turn will hinge upon this weekend’s event risks. If nothi Read more text…

Did Jim Chanos Give Up Shorting?

Legendary short seller Jim Chanos recently started going long on certain shares. For the first time Chanos’ Kynikos Associates LP filed a 13F form that showed several long positions in common stocks such as Citigroup (C), NYSE Euronext (NYX), NASDAQ OMX (NDAQ), Focus Media Holding Ltd (FMCN), Rackspace Hosting (RAX), Terremark Worldwide Inc (TMRK). It’s well known that Chanos thinks there is a real estate bubble in China and he has been shorting it for the past 1.5 years. Yet, he had 159,000 shares of China Real Estate Info Corp (CRIC) in his portfolio. Did Jim Chanos give up shorting? Why did he suddenly start going long?

Brian F. Nichols, CFO of Kynikos Associates LP, didn’t respond to a message we sent him. We have three theories though. Short selling is a tough business. It is so

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Record Commodities Prices and the Forex Markets

Propelled by economic recovery and the recent Mideast political turmoil, oil prices have firmly shaken off any lingering credit crisis weakness, and are headed towards a record high. Moreover, analysts are warning that due to certain fundamental changes to the global economy, prices will almost certainly remain high for the foreseeable future. The same goes for commodities. Whether directly or indirectly, the implications for forex market will be significant.

First of all, there is a direct impact on trade, and hence on the demand for particular currencies. Norway, Russia, Saudia Arabia, and a dozen other countries are witnessing record capital inflow expanding current account surpluses.

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CRB Index Hits Another New High; Still Down Over 20% From Peak

Although it seems as though a day doesn’t go by where at least one commodity is spiking to all-time highs, it may be surprising to some that the CRB Commodity Index is still down 22.3% from its all-time high in 2008.  After falling more than 57.7% from its peak, the CRB Index has rallied by 83.6%, which is actually a bit less than the S&P 500 which has rallied 96% and is currently down 15.2% from its all-time high.

Source: www.bespokeinvest.com