04/22/10 St. Louis, Missouri – Talk about counting flowers on the wall, playing solitaire till dawn with a deck of 51, and all those other things that fall under the category of being bored, and dull… That was the day in currencies yesterday…
The euro (EUR) continued to have pressure applied from Greece, and the Canadian dollar/loonie (CAD) remained above parity all day long! And other than that… I was smoking cigarettes and watching Captain Kangaroo, now don’t tell me… I’ve got nothing to do!
In the overnight markets, risk assets were sold off in Asia, and then bought in Europe, leaving them trading in the same clothes as yesterday… The Canadian loonie did slip back below parity overnight, but really the move is miniscule.
Gold really mounted a charge during the day… And I know that we really only care about how gold does versus the dollar, since the majority of us are dollar based investors… But the real move by gold yesterday came versus the euro… Which makes sense given the decline of the euro in recent months.
A rise in commodities and risk taking is going on, folks… Are you a part of it?
The boys and girls over at Morgan Stanley reported that their risk taking in commodities increased by 17% in the first quarter… And the boys and girls over at Goldman Sachs reported that their risking in commodities increased by 29%…
Many times over the past 10 years, I’ve talked to you about the commodities bull market, and how Jim Rogers explained in his book how, in the recorded history of commodity bull markets, the average length of them were 17-22 years… We’ve only been on this road of a bull market in commodities for 10 years, folks… Sure, they back off at times… But doesn’t that mean it’s a great time to buy more, because when they are cheaper you can buy more!
The news this morning regarding Greece just continues to get worse… Greek debt levels for last year are now forecast to exceed 14% of GDP… The last forecast was 12.7%.
Of course, if we counted the beans correctly here in the US our debt level to GDP would be something to behold, and not in a good way! And that’s just the budget deficit… Which leads to a higher national debt… But shoot, Rudy, why would we need to be concerned about that now? We’re just passing the 56th floor, and so far… So good…
In case you’re new to the Pfennig, that last line is a funny joke I tell about how the people that say deficits don’t matter remind me a guy who decides to jump off the Empire State Building, and as he passes the 56th floor, he says… So far… So good!
OK… Yesterday, there was news from half of the BRICs… Brazil and India issued a statement that said they agreed with the US in regards to the need for an upward revaluation of the Chinese renminbi (CNY)… Hmmm… I found that to be quite interesting, since these two have been all snuggly with China, but then go and say something that might rattle China’s cage.
Meanwhile back at the ranch, grandma is holding off the Indians! What I mean here is that all the while, these two currencies from India and Brazil, continue to gain versus the dollar… So, you could see why these two countries, which have a ton of trade with China, would like to see the renminbi keep in step with their own appreciation.
Speaking of India… Yesterday, I mentioned that the rupee (INR) had been Asia’s best performer… The currency has been stealth like in its move higher in recent months. I mean the daily move is so small that no one seems to notice, and then before you know it… Wham! You have a nice gain… The thing that I have in the back of my mind now, is simply that in the past 5 years, whenever the rupee got to this kind of appreciation versus the dollar, the Reserve Bank of India (RBI) would step in and intervene, taking the rupee lower.
Asia continues to be the bellwether for global growth… We’ve seen strong economic expansion, fueled by consumer spending and investment in China and India. And then, we had the upward revaluation in Singapore. So, it’s natural that the thoughts should be centered on a Chinese revaluation…
But… The Chinese are the Chinese, and they will NOT be told, coerced, or even “nudged” toward a revaluation, especially if it looks like they did it because of outside influence! So, in my opinion, you should resign to looking for a return to slow, daily, appreciation of the renminbi, like we used to see before the financial meltdown…
As I get ready to head to the Big Finish, I notice that the euro is in somewhat of a tailspin from the Greek news this morning.
Today, we get some data on PPI (wholesale inflation), and Existing Home Sales, along with the Weekly Initial Jobless Claims… Now somewhere in the black mountain hills of Dakota… Behind the curtain, in hopes that no one notices… The Treasury will announce their next funding amounts for 2, 5, and 7 year T-Notes… This should be interesting, folks, and the beat goes on…
To recap… The currencies didn’t move much yesterday, while gold did, especially versus the euro. The overnight markets sold risk assets, and the European markets bought risk assets, but, the euro is getting smacked around because Greek debt levels are being revised higher, and we get the funding announcement today by the Treasury…
Chuck Butler
for The Daily Reckoning
Chuck Butler
Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter, which is reposted here at The Daily Reckoning. With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News and World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune. Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.
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