Monday, Dec 04, 2006

Different view on the dollar

The Times: Demise of the dollar is greatly exaggerated

Marbers law states that when a currency reaches within 1 per cent of a previous important high, it enters a twilight zone from which it could easily emerge in either direction and as soon as it does emerge, with a move of 2 per cent or more, that establishes the new trend.

Last week the dollar entered the twilight zone against sterling. If the pound now rises above $2.06, it will keep moving upwards. If it falls below $1.95, it has nowhere to go but down.

Posted by sold 2 rent 1 @ 08:53 AM (455 views)
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1. little professor said...

The article really doesn't put forward any logical arguments to support its case. It full of "the best time to buy is when others are selling" nonsense. The dollar is in a death spiral, there's no two ways about it.

Monday, December 4, 2006 10:53AM Report Comment

2. harold said...

"it enters a twilight zone from which it could easily emerge in either direction"

sold 2 rent 1, that's not a law so much as stating the obvious. Yes, there are trends, but we tend only to be cognisant of them after the event.

The dollar is probably in the middle of a downward trend - only time (and massive intervention by the fed) will tell

Monday, December 4, 2006 11:08AM Report Comment

3. miniftse said...

ignore at your peril. there is a greater chance than any other time ever the dollar will suffer some form of collapse, but its still in nobodys interest and thats why it is still a very remote outcome, it will be one hell of a cock up if it ever unwinds. Chart the dollar against the yen (as the article suggests and it looks strong) the headlines are sensationalist at the moment, making illogical relationships with events such as black wednesday. i think it is moving in range, and think in the very near term we will see the dollar stengthen - keeping us in jobs ;-)

Monday, December 4, 2006 11:45AM Report Comment

4. Chillilizard said...

"This is not the time to explain in detail why trade balances are almost irrelevant to currency levels in a world of globalisation and deregulated financial markets..."

Well, I'm not an economist so I looked it up on wikipedia

"A currency will tend to become more valuable whenever demand for it is greater than the available supply." Seems to me to be the gist of it.

Also: "between 1994 and 2005, the Chinese yuan (CNY, ) was pegged to the United States dollar at 8.2768 to $1"

So I imagine, the pegged nature of the yuan is the cause of the huge trade imbalance between China and the States.

Also, China's recent declaration that it will be looking to move some of its dollar reserves into other currencies, is the cause of the dollar's weakness????

The standard economic truism: "An increase in supply decreases the price." seems to apply. Maybe the author is referring to speculative bubbles in the forex markets??? Poor argument. Or have I missed something?

Anyway, seems to me the dollar's value is really up to the Chinese, who may not want a falling dollar after all.

And, how does the huge debt levels of American's factor in? Maybe if this money was borrowed from overseas markets and the Amercan's 'have currency risk'. That should make the bite of debt worse when the dollar falls, but that shouldn't be the initial cause of the fall. Or is it simply the American's can't lend anymore and therefore aren't buying Chinese goods anymore, exacerbating the trade deficit.

Monday, December 4, 2006 11:54AM Report Comment

5. sold 2 rent 1 said...

The strength of GBP and EUR is just reflecting the huge issue of where does money go when the world's reserve currency is losing its status.

If in 6 months it is clear that the stock markets are unwinding, the worldwide property bubble has maxed out, and sterling and the euro can no longer take any more of this "flight from the dollar". Where does all this money go?

I read in The Times yesterday that the property hotspots around the globe are looking increasingly top-heavy. Dubai was described as one big building site. Similar issues are happening in Bulgaria.

I went out to Turkey last week to see my 2 renovation projects. Similar massive over supply issues are occurring there too.

I am still backing commodities as the outlet for this money.

China is building massive storage facilities for oil. Oil might be a better bet than gold - it has much better usage
When oil gets in short supply there will be more wars and regional tensions. These tensions can only push prices higher.

Monday, December 4, 2006 12:38PM Report Comment

6. Ticktock said...

Ref -Once the whole world believes that a currency will keep on falling, there is nobody left to sell it and, therefore, the trend is likely to reverse.

Nobody (sitting on mountains of dollars) left to sell it? I don't know where to start, and so won't, but what a silly article.

If the Times can't better than this for its sheep, then it is certainly time to sell the greenback (thats if anyone in the world has got any of course!)

Monday, December 4, 2006 05:09PM Report Comment

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