Double Whammy
Friday, November 30, 2007
Q. What is stonger than The Economist cover curse for dollar bears?
A. An Economist dollar cover that they've ripped off from someone else.
Yes, ladies and gents, we have a double whammy potential dollar cover curse this week, as both Der Spiegel and The Economist put the falling dollar on the cover. Amusingly, they both use the same metaphor, that of a plane going down in flames. Note that Der Speigel came out earlier in the week, so the next time an Englishman tells you about the great English wit, ask him why they need to steal ideas from the Germans!
In any case, the dollar on the cover of The Economist traditionally spells the end, if only temporarily, of rallies in EUR/USD. For those who are relatively new to this space, take a walk with Macro Man down memory lane, back to December 2006.....
....December 2004.....
....and February 2004.
At this point, Macro Man is not prepared to say that the buck is going to quit going down, especially given yesterday's open letter calling for a maxi-reval of GCC currencies. By the same token, after a nice run it's not terribly difficult to bank profits on longstanding short dollar exposure. 
9 comments:
I do think we're perhaps seeing some appetite to rotate the axis of dollar weakness away from the Europeans and back towards the peggers and/or Asia.
How durable that is may depend on whether PBOC decides to buy €5 billion at 7 am London time on Monday morning....
I'm glad that some of y'all read that shiny toilet-paper rag, so I don't have to ....
Guud pikturs, wud lak to chat but hecilopters outisde and Momma says come on and git some. Better go.
MM, you said "I do think we're perhaps seeing some appetite to rotate the axis of dollar weakness away from the Europeans and back towards the peggers and/or Asia."
What do you mean by rotate the axis of weakness? What trade does it suggest (long peggers)? What is the best instrument for this?
I simply meant that dollar shorts may have decided to maintain their dollar position, but sell our their euros and pounds, for example, and buy things like RMB, or some of the Gulf currencies. Certainly that's been my stance in the real job.
A professional investor can sell USD/AED, USD/KWD, USD/SAR et al through a bank/broker. I suspect that such opportunities are probably limited for retail. A proxy might be other Asian currencies, including (if you're concerned about further equity market weakness) the yen.
MM,
For ur weekend reading
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980690#PaperDownload
I consider The Economist poorly art directed, but would still guess that they had finished cover art before they had a chance to see Der Spiegel.
A plane going down in flames is an obvious enough metaphor to be a coincidence.
Oh, I absolutely agree that it's a coincidence, but given the British national obsession about the quality of domestic wit, I couldn't resist a little dig....
The euro bottom trawlers seem to be coming up mostly with the grand banks in their nets. Anybody here long Newfoundland?