19 replies to this topic

[Steve Netwriter]

I am finding the numerous articles talking about the "strong US$" rather annoying. Annoying because I think they paint a misleading picture.
If you view the US$ against the Euro, sure.

But there is another way of looking at it:



All the debt currencies are down against the non-debt Yen.
So far, it's just that the US$ hasn't fallen as much as the others. IMO at least some of this is due to intervention.

I think the US$JPY is very important. More important than the EURUS$.

[Andrew McP]

It's hard to argue with graphs like that. Now, if only PMs were doing what they're supposed to and look like the inverse of all that!

Having said that, after listening to Eric King on FS at the weekend my PM batteries are freshly charged. Even if he turns out to be wrong, I don't care. He just makes me feel better about it all. :-)

Andrew McP

[Steve Netwriter]

It's hard to argue with graphs like that. Now, if only PMs were doing what they're supposed to and look like the inverse of all that!

Having said that, after listening to Eric King on FS at the weekend my PM batteries are freshly charged. Even if he turns out to be wrong, I don't care. He just makes me feel better about it all. :-)

Andrew McP

I agree 100%

[romans holiday]

I agree we need to distance ourselves from a US dollar-centric approach to the value of things. Which is not too difficult to do considering the appalling state of their economy.  

Also, looks to me that we have all the beginnings of a crisis in currencies which must surely spread to the dollar soon.

[Steve Netwriter]

This does paint a slightly different picture.

Europe on the brink of currency crisis meltdown

The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
.....
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.

Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.

http://www.telegraph.co.uk/finance/comment...s-meltdown.html

I think one day soon we'll want to just measure things against gold

[Ologhai Jones]

All the debt currencies are down against the non-debt Yen.

So, the Yen is strong, right?

What link is there between the strength of a country's stock market and the strength of its currency (if any)?

The stock markets in the US, the UK and in Japan are crashing; sterling is weak, the Dollar is doing okay against most other currencies, and the Yen is strong... I don't see any pattern...  

Furthermore (to derail the thread a tad), not so long ago (certainly with the last six months), the Japanese stock market seemed often to be tipped as a good investment. I had considered the idea of finding a means[1] of putting some money that way.

Presumably, the Japanese stock market is an even better investment now?  

[1] I'm still very green when it comes to buying stocks, but I assume I'd've been able to find an ETF that tracks the Nikkei?

[Layman]

So, the Yen is strong, right?

I agree.

I can't agree that the USD is "falling less slowly" when it's only doing this in comparison to one other currency.
I think you really have to attribute this to the JPY rising.

The USD has been rising against most other currencies, and gold, and silver, and commodities, and oil, and stocks, and..., and... and...

To find one other "thing" which it's not rising against (ie the JPY) doesn't disprove this - all IMO, of course.

[romans holiday]

All is relative. It comes down to what you take as your fixed point of reference. This massive volatility between currencies can not be good for them insofar as it shakes our faith in them.  People are not supposed to question the value of a currency.... when this questioning starts on mass their mystique is lost and the crisis begins. I can not see the US dollar escaping this.... maybe the Yen will.

Due to this psychology, which could easily play out, I am glad to be in PMs which have historically proven to be trusted currencies.

[id5]

All is relative. It comes down to what you take as your fixed point of reference...

A point of reference is the single biggest problem is working out which currencies are rising, standing still or falling, I try to use a basket of other currencies.

Oh! And FFS please don’t suggest gold or you will just get Magpie going again    

[trendsetter]

A point of reference is the single biggest problem is working out which currencies are rising, standing still or falling, I try to use a basket of other currencies.

Oh! And FFS please don’t suggest gold or you will just get Magpie going again    

Try the US dollar index.  It's been going straight up for 6 months, frankly it's ridiculous to say that it is devaluing if you look at the graph for more than 1/2 a second.

[id5]

Try the US dollar index.  It's been going straight up for 6 months, frankly it's ridiculous to say that it is devaluing if you look at the graph for more than 1/2 a second.

The US Dollar Index is great for looking at the performance of the dollar but not for looking at the performance of other currencies, CZK for example.

[Steve Netwriter]

So, the Yen is strong, right?

What link is there between the strength of a country's stock market and the strength of its currency (if any)?

The stock markets in the US, the UK and in Japan are crashing; sterling is weak, the Dollar is doing okay against most other currencies, and the Yen is strong... I don't see any pattern...  

Furthermore (to derail the thread a tad), not so long ago (certainly with the last six months), the Japanese stock market seemed often to be tipped as a good investment. I had considered the idea of finding a means[1] of putting some money that way.

Presumably, the Japanese stock market is an even better investment now?  

[1] I'm still very green when it comes to buying stocks, but I assume I'd've been able to find an ETF that tracks the Nikkei?

Hi OJ,
IMO the Yen was at its weakest at the end of last year (when I bought). A fully wound up carry trade. IMO part of that carry trade went into US, UK and other stock markets. So part of the drop in stocks markets is either caused by the carry trade unwind, or causes part of the carry trade unwind.
I don't think the Japanese stock market is important. IMO it's not about the strength or weakness of Japan and the Yen, it's about all the other countries that have been involved in the Yen carry trade. So rather than buying a predicted strengthening Yen, I was buying a currency I viewed as wound down as low as it was going to go, and one which would float back to the surface.

The Japanese stock market, property etc would have been an interesting investment. You'd have gained on the currency, but lost on the stock market.
I wouldn't touch any stock market at the moment. Have you not seen my thread on that ?

Stock Market Predictions
Analysis of the S&P500 & Gold from 1880 to 2008
http://www.greenenergyinvestors.com/index.php?showtopic=4799

I gather a little contrary to what some on here think  

IMO the Yen has a way to go yet.

Best to check out my thread on it:

Forex Discussions
Charts, Musings, Predictions
http://www.greenenergyinvestors.com/index.php?showtopic=3239

I am very much into Yen and the GBP & NZ$.

[Steve Netwriter]

I tend to look for alternate ways to look at things to what appears to be the mass media take on things, and what I gather is also the prevailing view of traders.
I think that attitude is part of what adds the "Edge" to Global Edge Investors

So I make no apology for going against "perceived wisdom". In fact I strive to do that.

OK, lets examine the case. First, lets view the same currencies relative to the Euro:



Just looking at that, is that a simpler or more complex picture compared with the one relative to the Yen:



To me, part of the aim is to simplify the picture.

Now, what do these currencies have in common: US$, GBP, AUD, NZ$ ?

I'll give you a clue:



They are all debt countries. To me, that puts them together as a group.

How about the Yen ? That's not a debt country. That's a money 'exporter'.
That's why I like to view the currencies relative to the Yen. To me it often makes a simpler picture, and it shows the relationship between money import and money export countries.

Now, view this for NZ as an example:



The blue is a massive Yen carry trade winding up. The red is the potential unwind. Repeat that picture for all the money import countries.
That is why they talk about the Yen carry trade as being another "weapon of mass destruction". (or similar expression).

Now what about the US$ Index.



What exactly is the point ?
It's mainly the US$EUR. It's not even trade weighted, which is why Jim Sinclair uses a different index.

What is ridiculous is rejecting alternate views out of hand without thinking about it. They may have merit you don't yet see.
And IMO finding that new insight that may be contrary to the mainstream media view is one thing that can give us that "edge".

[tinecu]

I tend to look for alternate ways to look at things to what appears to be the mass media take on things, and what I gather is also the prevailing view of traders.
I think that attitude is part of what adds the "Edge" to Global Edge Investors

So I make no apology for going against "perceived wisdom". In fact I strive to do that.

OK, lets examine the case. First, lets view the same currencies relative to the Euro:



Just looking at that, is that a simpler or more complex picture compared with the one relative to the Yen:



To me, part of the aim is to simplify the picture.

Now, what do these currencies have in common: US$, GBP, AUD, NZ$ ?

I'll give you a clue:



They are all debt countries. To me, that puts them together as a group.

How about the Yen ? That's not a debt country. That's a money 'exporter'.
That's why I like to view the currencies relative to the Yen. To me it often makes a simpler picture, and it shows the relationship between money import and money export countries.

Now, view this for NZ as an example:



The blue is a massive Yen carry trade winding up. The red is the potential unwind. Repeat that picture for all the money import countries.
That is why they talk about the Yen carry trade as being another "weapon of mass destruction". (or similar expression).

Now what about the US$ Index.



What exactly is the point ?
It's mainly the US$EUR. It's not even trade weighted, which is why Jim Sinclair uses a different index.

What is ridiculous is rejecting alternate views out of hand without thinking about it. They may have merit you don't yet see.
And IMO finding that new insight that may be contrary to the mainstream media view is one thing that can give us that "edge".

Most excellent post.

[Steve Netwriter]

Cheers

Luke and Joe's Most Excellent Adventure in New Zealand
http://www.youtube.com/watch?v=-rnL1Ie2UxU

@1:50 - ouch !

It seems like a shame to live in NZ and not take up skiing  

[trendsetter]

Dollar and Yen were rising against all currencies.

Dollar was also rising against real estate, against gold, against copper, and against stocks over the last week until it has just bounced.

There is almost no asset, apart from bonds or JPY in which it was strengthening.

With that outlook, I can't see how one could describe its price action as not rising.

[romans holiday]

A point of reference is the single biggest problem is working out which currencies are rising, standing still or falling, I try to use a basket of other currencies.

Oh! And FFS please don’t suggest gold or you will just get Magpie going again    

I also like Bob Hoyes idea of using a basket of commodities... with which he talks about the true value of gold.  Let's face it, POG in US dollars is pretty arbitrary these days.... and yet it is a hard habit to break.

As for the value of currencies.... well as soon as we ask the question it becomes less which can lead to a vicious spiral. Given that the value of a currency resides in unquestioned faith, how long do you think the dollar will be almighty for?

Edit: In reality, there is no fixed point for currencies... all is flux.... but when people realise this and wake from their monetary slumber......

[ares]

So besides the Yen what is the dollar not rising against?

I am not sure those percentages you have written on the graphs are correct you have GBPJPY down 67%? not sure how you get that from a ~250 -> ~150 move which is more like 40% same for most of the others.

Better way to look at things is over the last 5 years, then the trends are far clearer despite this 25% rally (71->87) in the dollar's fortunes.

I agree completely about the uselessness of the Dollar index, I mean who cares... using Gold and other commodities and financial assets is a much more useful measure, and that has shown the dollar rising very strongly. I know lots of people dislike the dollar rising but just means the next leg down (or up in gold) will be from a higher level.

[Steve Netwriter]

I am not sure those percentages you have written on the graphs are correct you have GBPJPY down 67%? not sure how you get that from a ~250 -> ~150 move which is more like 40% same for most of the others.

Numbers just a rough guide by looking at the charts.

Re the maths:
£1 bought 240 Yen.

Those 240 Yen now buy 240/143 pounds = £1.67.

So £1 turned into £1.67 = 67% profit.

That's how I think about it. Does that make sense ?

[Steve Netwriter]

Dollar Up, Everything Else Down as Recession Deepens

Poor Retail Sales Report Compounds Investor Gloom
http://www.howestreet.com/articles/index.php?article_id=8395

The US dollar index has pushed well above 84.25 as most currencies have lost ground today. The New Zealand dollar is more than a cent lower as it continues to reel from the recent S&P warning regarding its growing current account surplus. The euro made gains earlier today, but has now given up more than 160 basis points in the last few hours, while the Australian and Canadian dollars are on the defensive along with commodity prices. Crude oil traded above $38 earlier today but has since slipped below $37.50 after the retail sales data, and gold is off about $11 as it seems to be in a holding pattern just above $800. The British pound is the one currency in positive territory today as it stages something of a recovery after a massive sell-off yesterday. The pound has managed to claw its way back above 1.45, a level marking a 6-year low for sterling.

Oh give me a break !!!!  



The Yen is rising, other currencies (including the US$) are falling.

This chart may also list the countries/currencies likely to collapse.