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Commodity Currencies Trade Higher than the U.S. Dollar

Commodity currencies are trading near highs against the U.S. dollar today as concerns about what’s next for the U.S. debt ceiling dominate financial markets.

Indeed, the Aussie, loonie and kiwi are all trading high against the U.S. dollar as investors turn to gold, oil and other commodities that generally do well when the U.S. dollar is lower. These commodity currencies receive support from higher commodity prices.

With a U.S. debt default becoming a possibility, many investors are bracing themselves for what could be next: Another global financial crisis and a possible U.S. dollar crash. 

Debt Ceiling Impasse is Killing the Dollar, No Support from Data

The U.S. debt ceiling impasse is killing the dollar.  Last night, President Obama addressed the nation and instead of announcing a compromised debt deal and saving the market from more pain, he expressed frustration with the lack of progress and made a case for why passing the debt ceiling is absolutely necessary.  Even though the Democrats appear willing to accept a deal that does not involve tax increases, it is still unclear whether there will be a temporary increase in the debt ceiling or a more permanent increase that will get the economy through the November 2012 elections. Unfortunately this continued uncertainty has proven to be extremely bearish for the U.S. dollar and until the debt ceiling is increased, the greenback will remain under pressure.  Although the U.S. go

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Currency Correlations, Part II: Canadian Dollar Begins its Decline

In April, I wrote a post entitled, “Economic Theory Implies Canadian Dollar will Fall,” in which I argued that the currency’s impressive rise was belied by fundamentals. It seems the gods of forex read that post; since then, the Loonie has fallen 3% against the US dollar alone. Based on my reading of the tea leaves, the loonie will fall further over the coming months, and finish the year below parity.

My contention is basically that investors are falsely treating the Loonie is a high-yield growth currency, and hence, bidding up its value. There are a few reasons why I believe this viewpoint is completely erroneous. First of all, Canada’s economy is both plain and mature. While i

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Canadian Dollar Struggles Against Volatility

The Canadian dollar is struggling in forex trading on the currency market today. Choppy trading marks CAD/USD as economic news out of the U.S. sends waves of uncertainty through the financial markets.

While the loonie has been struggling to hold on in currency trading, it looks as though it might succumb. The dollar is rising as forex traders look for a safe haven amidst the concerns about the future of the U.S. economy after rising jobless claims and Bernanke’s disappointing economic forecast.

Additionally, the Canadian dollar is likely to suffer as oil price drop. The Canadian dollar is connected to oil prices, and with oil prices heading back toward $90 a barrel, it appears that the loonie will have trouble. 

Hard Week for Dollar as US Economy Stalls

The US dollar dropped this week against most major currencies as the macroeconomic data was terrible, reducing attractiveness of the currency as a safe asset.

The global economic situation wasn’t very favorable for the dollar. The influence of the European crisis on market sentiments weakened somewhat, higher-yielding assets are again in favor of investors, erasing appeal of safe currencies.

Without the support from outside of the US the dollar could only rely on the new from America. And the news were really. Virtually every sector of the US economy, be it manufacturing of the housing market, performed very bad. Some analysts think that the r

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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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Why the Dollar is Here to Stay

In a recent piece published in the WSJ (“Why the Dollar’s Reign Is Near an End“), Berkley Professor Barry Eichengreen declared that the Dollar will soon cease to be the world’s reserve currency. According to Dr. Eichengreen, within 10 years and for various reasons, the Dollar will become one of many reserve currencies, competing for preference with the Euro, Chinese Yuan, Japanese Yen, and Swiss Franc. While Dr. Eichengreen makes some good points, however, I don’t think most of his arguments stand up to scrutiny.

His thesis can be boiled down into a few premises. First of all, he argues that it is fundamentally illogical that oil should be priced in Dollars, and that countries conducting bilateral trade should settle their accounts using Dollars. Dr. Eichengre

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Existing Homes Data Fails to Help the Dollar

Better than expected U.S. housing market numbers failed to help the dollar on a day when the greenback is being sold against the euro, British pound, Japanese Yen and other major currencies. Existing home sales rose 2.7 percent in the month of January, marking three back to back month of positive momentum in the housing market. Sales of existing homes surged in December, leading many investors to look for a natural pullback in January. However in addition to climbing to the highest level in 8 months, existing home sales growth in December was also revised higher. The total number of units sold hit 5.36 million, up from 5.22 million the previous month.

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