Data Week

Good day. Well, it’s Easter Monday, which means that most of the trading desks around the world are still on holiday. That’s not here in the United States. Everyone is back at their desks today, with bright smiling faces! I hope your weekend was grand. Mine sure was, and I can tell because I did not check the Internet for currency/economic stories all weekend!

Friday’s data, which really flew under the radar screen with everyone away, saw March numbers for capacity utilization, and industrial production come in about as expected, which wasn’t any indication that the economy is going great shakes. But, we knew that already, didn’t we? Yes, we did!

Overnight, the dollar was getting sold in the Asian markets, as traders fear that today’s printing of the Net Foreign Security Purchases (NFPS) will show a lower figure than January’s printing of $66 billion. Like I told you the other day, this number has really been trending downward since hitting a high of $105 billion in October 2005. The experts see the NFPS coming in at $60 billion, which when I run the numbers, isn’t enough to cover the current account deficit and indirect foreign investment.

If everyone else calculates that as I do, it should signal a real strong sell of the dollar. We’ll be inundated with data in the United States, this week. But, the market participants’ focus will be on today’s NFPS printing, and Chinese President Hu’s visit to Washington on Thursday. Again, for those of you not paying attention in previous classes, China has been opening doors to a more flexible currency policy, but probably much too little too late to appease U.S. lawmakers from passing some very tough laws putting into place stiff tariffs on Chinese exports to the United States.

Last Friday, I was looking over some research on China and came to the thought that Asia is ready to take on the world with regard to economic growth. Of course, China leads the way with its lofty 9% GDP, but Japan and a host of others will also contribute. Global growth is really on the rise; you see it everywhere, with rate hikes, and rising bond yields. I think that the Asian countries and their currencies are on the rise. The “feel good” stories of 2006 and 2007 are going to come from these economies.

Take Thailand as an example. Here you have a growing economy that is experiencing a ton of foreign investment, especially in Thai stocks. Thailand’s central bank has taken a page from the reserve banks of Australia and New Zealand, by reacting to this growth, before inflation gets out of hand, with rate hikes. In Thailand, you can get yield on bonds and deposits. You can’t get that in Japan or Singapore. You will soon enough, but right now, the player in Asia, other than China, is Thailand.

Well, I knew it would happen sooner or later. Gold has gone over $600. It just so happens that this coincides with oil going back over $70 per barrel, overnight. Silver wasn’t left behind as it now trades above $13! Wow! Geez, Louise. What’s going on here? Awww, you know as well as I do. Investors aren’t buying the line of bull from the government that inflation is in check.

On Wednesday, we’ll see CPI (inflation) for March. Right now, it is expected to stick down from February’s year-on-year 3.6% figure. I don’t see how that can happen, do you? Long-time readers know that I dismiss this figure as garbage. Inflation is probably closer to 7% than it is to the government’s figure!

I’ve been following India a lot lately, trying to get a good handle on what’s going on in that country. Yes, we’ve all heard about the phenomenal economic growth, but what else is there? Well, for one, inflation has been held in check by the reserve bank by raising interest rates and monitoring money flow. The reserve bank meets tomorrow, and I fully expect them to raise rates again – to offset the pressures of higher oil prices.

So, I’m about out of things to talk about. Lots of data due this week, and I expect a lot of pressure on the dollar this week. The euro has already gained about half a cent since I came in this morning and turned the screens on!

Currencies today: A$ .7330, kiwi .6225, C$ .8715, euro 1.2220, sterling 1.7650, Swiss .7776, ISK 76.20, rand 6.0720, krone 6.4360, forint 218.77, zloty 3.22, koruna 23.4650, yen 118, baht 37.88, sing 1.6020,INR 45.13 China 8.0202, dollar index 89.09, silver $13.28, and gold $605.75

That’s it for today. A grand time was had by all at our EverBank night at the ballpark! Speaking of the ballpark, how about that day Albert Pujols had yesterday? Three home runs, with the last one bringing a win to the team! Wow! I hope I’m still as upbeat about what’s going on in the currency markets at the end of the week! Have a great Monday, and week!

Chuck Butler
April 17, 2006

The Daily Reckoning