A Surprise For China!
"Yes, behind door number two was (drum roll please) Big Al Greenspan! Even though his legacy is being questioned here at home, he's still a big shot with the Asian people."
By Chuck Butler In this issue… A stronger renminbi "inevitable"? Guess who's behind door number two? Loonies sell off…a better entry point? Hawkish talk from the ECB.
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--------------------- And now…today's Pfennig! A Surprise For China! Good day. It looks like Southern Florida is in Wilma's path. I sure hope everyone learned a lesson and got the heck out of Dodge. I started to complain about the weather on my mini camping trip this weekend, but then, with a hurricane ready to unleash its devastation on Florida, I thought better of that. Well, I left you Friday with the thought that the currencies could hold onto overnight gains, since there was no a sign of data to be printed, anywhere. But noooooo! We just had to have a sell-off, and for no particular reason at all! Last night, I checked the Japanese markets, and at that time, the yen was getting hammered because of a story that Japan was nowhere close to raising interest rates off their zero rate policy. This goes against everything we've heard, seen, and read lately. Sometimes I think that when these stories get started, it is some big house that is short the currency and need a better/cheaper level to buy back. Oh, that wouldn't happen would it? Nah…it's just Chuck and his conspiracies. However, since I went to bed, the yen turned around when a People's Bank of China advisory member, Yu, said that a stronger Chinese currency is "inevitable." Hmmm…but when, Mr. Yu, when? Speaking of China, did you see that U.S. Treasury Secretary Snow sprung a surprise visitor on the Chinese? Yes, behind door number two was (drum roll please) Big Al Greenspan! Even though his legacy is being questioned here at home, he's still a big shot with the Asian people. Of course, he's the one that's made it possible for the Asian countries to prosper. You know, one of my favorite writers to read, William Pesek, Jr., who writes for Bloomberg, really nailed my thoughts on this, right on the head! Let's listen in to Mr. Pesek, Jr.: "The Fed's policy of keeping interest rates low in the first half of this decade fueled speculation in high-risk assets. Two of its byproducts are a wealth effect on U.S. consumption and a cheap capital-fueled investment boom in China. One can argue these are the twin engines - or bubbles, depending on your perspective - for the global economy today." OK. Enough with China! Our neighbors to the north, Canada, saw some strong selling of the loonie for the first time in a month of Sunday's overnight. First, on Friday, Canada announced that last month's retail sales had fallen. There was also a distress signal sent out to me from Canadian retailers, begging me to bring my beautiful bride back to Canada to recreate our last visit. Recall that when we were there last, retail sales skyrocketed!!! However, that's not all that is bugging the loonies right now. The fact that oil and gas have really backed off in the past week has a lot to do with a weaker loonie right now, too. This new price in the loonie - below 84 cents - should bring the buyers out of the walls. So, the sell off should be short lived, in my opinion! In Euroland, the single unit seems to be bumping its head on a ceiling that sits at the 1.20 level. The hawkish tones coming from the ECB continued on Friday, when ECB Chief Economist Issing, implied that a December rate hike was possible. Of course, ECB president Trichet, used diplomacy when talking about interest rates, mentioning that strong vigilance on inflation was required, and that the current rates were still appropriate. You see, give the markets a rate hike signal, and then take it away. There are no scheduled data releases today in the United States, so once again, we wait and see where the N.Y. traders are going to take the currencies when they arrive. Tomorrow, we'll see consumer confidence for this month, and it is expected to gain a bit, after taking a belly flop last month. Of course, I don't know what would have changed in the past month that would make people confident, but like I always say, "They don't ask me!" Wednesday night will bring us the Reserve Bank of New Zealand's meeting on rates. Like I've said all along, I expect the RBNZ to raise their OCR (Official Cash Rate). This thought in the markets is what has kept the kiwi above 70 cents and helped it outperform Aussie dollars. I'm not even going to talk about what happens if the RBNZ keeps rates unchanged. Currencies today: A$ .7490, kiwi .7015, C$ .8395, euro 1.1955, sterling 1.7690, Swiss .7740, rand 6.63, krone 6.55, forint 212, zloty 3.26, koruna 24.90, yen 115.60, baht 40.95, sing 1.6940, China 8.0916, pesos 10.87, and gold $465.00 That's it for today. I'm going to try and remember to talk about those repatriation flows by corporations tomorrow. Big win for my beloved Missouri Tigers on Saturday. Gotta keep it going! Rams win, too. Wow! Oh, well, gave a great Monday! |
