Asian Currencies

[Flummoxed]

Some great insight into the future of the USD in another thread. Shall we have one on the Asian economy/currencies now.

[TRIPxCORE]

When people are trying to compare currencies they usually take the one they are thinking about vs. USD. Even with it's downfall the last couple years, the USD is still the worlds reserve currency. So, with that in mind, Asian currencies should appreciate over the course of a year or so against the USD but there are roadblocks to this. China has the Yuan artificially undervalued to keep their exports up by pegging it to USD. Many countries, the US in particular have been chastising the Chinese to let the peg go but China is being it's stubborn old self. They have said that in the future they will look into easing the range for the peg but not let it float freely. Chinese Yuan is the catalyst for the rest of them. If China lets the markets decide the value of their currency, it will appreciate sharply and the rest of the Asian currencies should follow suit.

Even without China, Asian currencies should appreciate vs. USD but not nearly as much as if China were involved. USD has been slumping for the past 2 years and will continue as long as the government wants it to. With two huge deficits gnawing at their side, the US government has no choice but to let USD depreciate. So look for Asian currencies to do pretty well vs. USD. Also, Japan not intervening in the currency markets would help Asian currencies as well but the Japanese government doesn't want Yen to get too expensive as it will hurt their exports and Sony, Panasonic, Honda, and Toyota wouldn't be very happy about that. My money is in Euro's.

[Flummoxed]

Intersesting thoughts Trip.

I must admit to considering buying a few thousand quids worth of Chinese money. It's that, or Singapore Dollars.

What's the state of the peg between the HKD and USD these days... lost track of things.

[et33.com]

the big guns and bullets have the rest of the world grip in the hands of USA / no one could let USA fall / at least not yet / the big con job will go on with growing deficients and bleed the future generations of USA folks dry / and then one day / it will all collaspe / and bullets will start flying all over to burn the countries that own too much US bonds / same old story / sell them worthless bonds / start a war and wipe out the debts...

[Flummoxed]

[Dickie]

The debts are in dollars so the easiest solution to the debt problem is to let inflation rip and the dollar to fall out of bed. Once it's at the level of USD1000M / GBP pay back the debts. That's how AH wiped out Germany's post-war (first) debts.

In case you think 1000M/GBP is ludicrous, at the peak of Germany's inflation chaos the exchange rate was DM22,300M / GBP

[johnnyk]

The debts are in dollars so the easiest solution to the debt problem is to let inflation rip and the dollar to fall out of bed. Once it's at the level of USD1000M / GBP pay back the debts. That's how AH wiped out Germany's post-war (first) debts.

In case you think 1000M/GBP is ludicrous, at the peak of Germany's inflation chaos the exchange rate was DM22,300M / GBP

<{POST_SNAPBACK}>

The great German inflation came 10 years before AH took power.

[Harmonica]

Flummoxed,

Any worthwhile analysis of the US dollar should start with a thorough technical analysis of the US Dollar Index -- this plots the dollar against a basket of currencies. It is a tool used by the pros and even we little guys rely on it heavily.

After getting a general idea of where this Index is trending, one can then pick the individual currency one is interested in and study it's relationship to the Dollar.

Here's my take, humbly given and wishing you the best of luck -

USD is going to blast-off to the stratosphere during 2005. When will this blast-off begin? IMHO, within 90 days from now and could even begin next week. If it hasn't started by March 31st, fire me.

If the USD takes off, the Thai Baht will plummet like a one-legged man in a butt-kicking contest.

Hold dollars now and switch to Thai Baht in small quantities when necessary.

Ah! The joys of living in Thailand, playing the Dollar/Thai Baht and the bountiful Thai Stock market. God, do I love it so!

[simcity]

Flummoxed i do not know about europe ....

yes you can buy chinese yuen in bangkok ? BUT the rate is terrible from the bank ..

buying rates 3.90

selling rates 5.10

last time i wait to be in china to do the conversion ..

any hints ???

[Flummoxed]

Flummoxed,

Any worthwhile analysis of the US dollar  should start with a thorough technical analysis of the US Dollar Index -- this plots the dollar against a basket of currencies.  It is a tool used by the pros and even we little guys rely on it heavily.

After getting a general idea of where this Index is trending, one can then pick the individual currency one is interested in and study it's relationship to the Dollar.

Here's my take, humbly given and wishing you the best of luck -

USD is going to blast-off to the stratosphere during 2005.  When will this blast-off begin?  IMHO, within 90 days from now and could even begin next week. If it hasn't started by March 31st, fire me.

If the USD takes off, the Thai Baht will plummet like a one-legged man in a butt-kicking contest.

Hold dollars now and switch to Thai Baht in small quantities when necessary.

Ah! The joys of living in Thailand, playing the Dollar/Thai Baht and the bountiful Thai Stock market.  God, do I love it so!

<{POST_SNAPBACK}>

You can't be serious?

Fair play to you if you're right.

Edited December 23, 2004 by Flummoxed

[~G~]

Flummoxed,

USD is going to blast-off to the stratosphere during 2005. 

<{POST_SNAPBACK}>

I think it will be closer to the truth to replace "blast-off" with "fall" and "stratosphere" with "abyss"

[LivinLOS]

Harmonica, based on what ??

I ahve been following the index quirte closely and its testing its support level of 80.. Thats a 20 year record low.. if it breaches that support how far and how fast it falls is anyones guess

Its interesting to note (sorry ravisher some more cut and paste) the following..

Last Wednesday, the Treasury Department reported that foreigners bought $48.1 billion in securities in October. This was down from the $67.5 billion they purchased in September. It was the lowest figure of the year and did not exceed the trade deficit which came in at a record $55.5 billion to the surprise of economists.

Since the summer, foreigners have been buying fewer US securities. In fact, they were net sellers of US stocks in August. The reason for this is simple. Foreigners lose money when the dollar declines. If you are a European investor who managed to buy the DOW on its July 2002 bottom you would only be break even right now, because the dollar has declined while the DOW has risen.

The trade deficit is only going to get worse and the dollar is going to continue its secular decline. At some point, foreigners are going to fear losing even more money in their US assets due to the dollar's decline and will sell out in a panic. Is this the end game of currency bear markets and the crisis phase? I think so. But According to the Economic Policy Institute, we are only starting to approach that point:

"If the dollar were being supported by demand from investors who find the U.S. market attractive, then steady growth in capital inflows from private investors to finance rising deficits would likely occur. However, private inflows have fallen in the last three years. Instead, foreign governments have been intervening in foreign exchange markets by purchasing a rapidly growing volume of U.S. government assets (shown as foreign government purchases of U.S. assets in the figure below). These inflows reached an annual rate of $348 billion in the first three quarters of 2004, or 55% of the funds necessary to finance the U.S. deficit. These same official government inflows were 47% of the total in 2003."

So in effect, the only thing keeping the dollar together right now is the intervention of foreign governments. In August, China made an emergency intervention in order to keep the dollar up. Foreign private investors pulled back their money and China came in to make the difference. But at some point even China will go away

Taken from wallstreetwindow.com, Dec 20.

[Harmonica]

LivinLOS,

Good idea to bring in a chart. I'm new here and didn't know that couldbe done. I do my charting in Metastock, so I guess a File/save to JPEG format will allow me to include it here?

Download USD Index from sharefin (data to 1970) or from Reuters DataLink (data to 1985) and then, firstly, the support is incorrectly being stated as 80. In reality there is a support zone between 80 and 84. The zone "fired" in 1990, 1992 and 1995.

I believe it will fire again and we are right there. I agree with you that if the support fails, it will be disastrous for the dollar.

Add 2 indicators to your chart, MACD (12,26,9) and RSI(14). Then correlate your price graph trendlines to the trendlines on both MACD and RSI. Try weekly and daily charts.

On the daily chart, I see a breakout on MACD, but no trendline breakout as yet on neither RSI nor Price chart.

I am waiting for the RSI breakout first to really double up on my exposure. As soon as I'm sure that the Macd trendline support from May 20, 2003 is going to hold, it will be a sign that the bottom is in.

Later, if correct, a move above 84.45 will tell me that we are well on our way and to load up some more.

My accumulation is nominal until the above mentioned signs start showing up; then I'll really load up.

[TRIPxCORE]

Here is the latest currency newsletter I receive. Have a look.

Sanity Returns..

Good day.... Some sanity crept back into the markets overnight with the dollar losing all of the gains it had made the past two days. There was no data which made this happen, just thin trading and people finally realizing that narrowing interest rate spreads will not take care of the twin deficits which plague the US. The Japanese markets are already on holiday and many US banks will be closed tomorrow, so expect more volatility and very thin markets.

The GDP number released yesterday was pretty much a non-event as it came in slightly higher than expected at 4% for the 3rd quarter. Today we will see much more data released including Personal Income, Spending, Durable Goods Orders, New Home Sales, U of Mich. Confidence, and the weekly jobs data. While I expect this data to come in fairly close to expectations, an unexpected number could have very dramatic results in these thin markets. Durable Goods Orders is the number which could do this. Expectations are for this number to reverse last months slide of -1.1% and show an increase of .6%. Year end buying will probably enable this number to show an increase, but if not the US$ will be sold off even further.

The top foreign exchange forecaster (not including Chuck Butler) in Bloomberg Market's annual rankings was Merrill Lynch & Co. And what, you might ask, are they forecasting for next year? Merrill predicts the dollar will drop to $1.36 per euro by the end of 2005 and 91 yen in the same period. I think these are rather weak calls as the Euro could actually hit $1.36 by the end of this year! But it is nice to know we are not alone in calling for a further slide of the greenback.

One thing that may stop this slow and steady decline of the dollar would be the end of the budget deficits and narrowing of the current account deficits. President Bush said on December 20 that he would propose a 'tough budget' to send a signal to financial markets that he is serious about reducing the federal deficit. I am from Missouri, so he is going to have to Show Me. I just can't see how we will be able to turn the deficit around with an ongoing war in Iraq, sky-rocketing health care costs, and an economy which is just 'muddling through'. I hope he does actually propose cuts in spending, but any cuts will undoubtedly take months if not years to have an affect on the deficit. A booming economy is in my opinion the only way we will see the budget deficit shrink, and I don't think we will see strong growth in the US until 2006. The US$ will continue to drift lower throughout 2005 and possibly into 2006.

The Pound Sterling reversed it's slide and traded back up over $1.92 after dropping to $1.91 in trading yesterday. To clarify my thoughts in yesterday's Pfennig, we don't suggest people sell their Pound Sterling. I was simply pointing out that several other writers have suggest selling Pounds at several times in the past year, but we don't agree with them. We feel the Pound Sterling will trade back up over 2.00 in the coming year with $2.05 not out of the question. The interest rate increases have done just what the Bank of England had wanted in slowing the housing market. While interest rates may stay at these levels for the next few months I believe the next move will again be up, not down. Recent data support this view. The government reported a jump in retail sales for November last week, higher than expected consumer price inflation, record employment and the strongest wage growth since March 2002. For those of you who have pounds, hold onto them and those that don't may want to look at putting some dollars to work at these cheap prices.

Those of you getting tired of waiting for China to go ahead and float their currency should look at moving out of the Renminbi into Singapore Dollars, Japanese Yen, or Thai Baht. While we believe China will eventually float their currency, these three alternatives are already floating and should match much of the eventual increase that you would receive in the Chinese Renminbi. We continue to believe Asia will be the engine of world growth in the coming years with China leading the way, but all of these currencies will benefit from this growth. The Singapore Dollar has been the best performing Asian currency over the last year with a 3.72% increase to the US$; the Japanese Yen gained 3.14% and Thai Baht 1.52% during the same period. This may not sound like much, but it is certainly better than the fixed Chinese Renminbi.

Currencies today: A$ .7659, kiwi .7129, C$ .8090, euro 1.3459, sterling 1.9225, Swiss .8717, rand 5.6458, krone 6.15, forint 182.77, zloty 3.03, koruna 22.73, yen 103.97, baht 39.03, sing 1.6387, pesos 11.13, and gold... $442.33

That's it for today... Sorry for the short Pfennig, but there just isn't a lot going on in the markets. I enjoyed the Mizzou - Illini game last night. The young Missouri kids played a good game and kept it close throughout, but were beaten by a better team. Be on the look out for Chuck's 'Christmas Pfennig' which he will be sending out tomorrow.

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

[~G~]

Download USD Index from sharefin (data to 1970) or from Reuters DataLink (data to 1985) and then, firstly,  the support is incorrectly being stated as 80. In reality there is a support zone between 80 and 84.  The zone "fired" in 1990, 1992 and 1995...

Add 2 indicators to your chart... Then correlate your price graph trendlines .... 

<{POST_SNAPBACK}>

Harmonica, techincal analysis can only follow what is happening, it doesn't come instead of reality. Support lines are being breached; even if the dollar will bounce off the support once or twice in the coming months it might then just dive right through it.

Analysis of the macro economics data for the dollar gives a one way prediction: down.

[Yangpuss]

Is Everbank the only way for small US investors to buy foreign currency? Are their commissions fair? (i mean their buy-sell prices)

[TRIPxCORE]

Is Everbank the only way for small US investors to buy foreign currency? Are their commissions fair? (i mean their buy-sell prices)

Its not the only way but is among the easiest for small investors. I used them before but don't anymore. No complaints about them. I thought their service was good. I would recommend them. Good luck.

[Harmonica]

G,

I hear you. We await the $'s next moves.

Merry c & Happy NY

[MattFS218]

Oanda.com has a FXTrading system that allows you to trade currencies with a 2 pip spread with a $100 USD minimum investment. I think they even pay you interest on your balance. I have an account but never got around to actually trading. So Euro/USD you can buy at 1.362 and buy at 1.360

Matt