</image> <atom10:link xmlns:atom10="http://www.w3.org/2005/Atom" rel="self" href="http://feeds.feedburner.com/4x-news" type="application/rss+xml" /><item> <title>Will Obama Embrace Strong Dollar Policy?</h1> <article> <h1>Will Obama Embrace Strong Dollar Policy?</h1> <p>4x-news — Fri, 14 Nov 2008 21:51:33 +0000</p> <p>While the Bush Administration nominally embraced a strong Dollar policy, the currency’s 20% decline over the last eight years suggests it was actually a low priority. The Obama administration, in contrast, is much more likely to maintain such a policy, a circumstance which could help the Dollar to continue its year-long rally. Obama will assume the office of the presidency at a time when US finances are looking particularly tenuous, with a projected 2009 budget deficit of $1 Trillion. In order to finance the government bailout, as well as an additional economic stimulus plan and a host of other initiatives (let’s not forget the two ongoing wars), Obama will need to spearhead an effort to attract more foreign capital. For this to happen, the Dollar’s status as the world’s reserve currency must be cemented and confidence in the Greenback must be restored. Ironically, Obama may receive a boost in this aspect from the credit crisis. The Guardian reports:</p> <blockquote dir="ltr"> <div>The dollar [rally] is likely to persist as market participants looked to snap up more U.S. assets after the decisive election of a candidate that promised to bring sweeping changes to a country mired in the worst economic crisis since the Great Depression.</div> </blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=1x2GmD"></img></a></p> </article> <article> <h1>All Signs Point to Down</h1> <p>4x-news — Sun, 09 Nov 2008 08:34:07 +0000</p> <p> Regardless of your preference, all economic indicators seem to be heading in the same direction: down. Home sales and home starts, as well as home prices, are way down and projected to fall further. Consumer spending is declining by double-digits (in annualized percentage terms), which is no surprise considering consumer sentiment recently touched an all-time low. The national unemployment rate and unemployment insurance claims are rising nearly every month and week, respectively. Factory production is falling, and inventories are rising. Stock market capitalization is down across the world, especially in export-driven markets like Japan and Korea. The US economy as a whole contracted in the last quarter. The distinct lack of nuance in the economic picture has led most economists to project that the current recession (although not officially a recession) will be the worst in decades. The Wall Street Journal reports:</p> <blockquote dir="ltr"><p>The current downturn is shaping up to be worse than the recessions of 1990-91 and 2001 and the prolonged downturn that ended in 1982. Banks are cutting back on lending, consumers are spending less, companies are shedding jobs amid sinking profits, and the housing bust that triggered the slide persists.</p></blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=YGnE8u"></img></a></p> </article> <article> <h1>Hedge Funds Crush British Pound</h1> <p>4x-news — Wed, 05 Nov 2008 09:00:16 +0000</p> <p>The British Pound is perhaps one of the worst victims of the credit crunch, having fallen 25% against the USD in the year-to-date. According to analysts, hedge funds deserve much of the blame. Apparently, most hedge funds, including those that are based in the UK, denominate their portfolios in terms of Dollars. As a result of the exodus away from emerging markets, such funds have found themselves awash in cash, which they have promptly converted into Dollars. The reasoning behind this investment strategy is twofold: first, as the incredible strength of the Dollar has illustrated, the prevailing wisdom among investors is that the US is currently the least risky place to invest. Second, the interest rate gap between the US and the rest of the world looks set to narrow, which means the yields on US security will become relatively attractive. The Telegraph reports:</p> <blockquote dir="ltr"><p>Worldwide interest rate forecasts are being revised downward, which has increased interest in the US where rates have already been slashed.</p></blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=1fwrgk"></img></a></p> </article> <article> <h1>Brazil Aims to Prop Up Real</h1> <p>4x-news — Fri, 31 Oct 2008 14:54:28 +0000</p> <p> In a bold but perhaps necessary move, the Central Bank of Brazil recently announced an injection of $50 Billion into forex markets intended to stem the 30% fall in the value of the Brazilian Real that has taken place so far this year. Unfortunately for Brazil, the forces tugging on emerging market currencies far exceed the potential counter-efforts that such a country is capable of waging. Call it a lack of confidence, or a sudden aversion to risk. Either way, investors are fleeing regions that only months ago, they were still flocking to in droves. High interest rates, strong economic fundamentals, even capital injections and liquidity initiatives are no match for the financial tsunami. In addition, it’s not as if the Brazilian economy is necessarily in a good position to emerge from the crisis unscathed, as its neighbor Argentina could soon default on its debt…again. Bloomberg News reports:</p> <blockquote dir="ltr"><p>The real has sunk 31 percent from a nine-year high of 1.5545 reached on Aug. 1 as the global crisis has driven down prices on the country’s commodity exports and eroded demand for higher- yielding, emerging-market assets. Only the South African rand, down 35 percent, has fallen more over that time.</p></blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=LR28Fs"></img></a></p> </article> <article> <h1>Credit Crisis Pummels Australian Dollar</h1> <p>4x-news — Thu, 30 Oct 2008 14:54:22 +0000</p> <p> The Australian Dollar has lost nearly 1/3 of its value (relative to the USD) over the last few months, as the credit crisis continues to drive investors away from areas perceived as risky. In other words, the best (and perhaps the only reasonable) explanation for its fall has very little to do with Australian economic fundamentals. Then again, the rise in the currency that took place over the last decade was also rooted in technical and financial trends, although rising commodity prices were also a factor. The Australian Dollar (as well as the New Zealand Kiwi) was one of the prime beneficiaries of carry-trades, due to unusually “generous” interest rate levels. Now that investors are chasing stability/capital preservation instead of yield, however, the currency has seriously fallen out of favor. The Australian reports:</p> <blockquote dir="ltr"><p>Equity markets would continue to drive currency markets, while being influenced by the ongoing financial crisis. “These are unprecedented times in volatility for the Australian dollar and currencies,” said [one analyst].</p></blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=SJmLXM"></img></a></p> </article> <article> <h1>EUR, GBP Plunge to Multi-year Lows</h1> <p>4x-news — Mon, 27 Oct 2008 08:39:04 +0000</p> <p>Global recessionary fears dominated the market headlines in the Wednesday session, with US equity bourses posting steep losses, crude oil slumping beneath the $70 per barrel level to $67.12 and spot gold at a one-year low to $774.57 per ounce. The greenback and yen benefited from continued safe-haven flows, posting steep gains versus the euro and sterling.</p> <p>The dollar surged to 1.2737 against the euro for the first time since November 2006. Although the FOMC will likely cut rates by 50-basis points to 1.0% when it meets next week, markets anticipate more aggressive policy easing from the ECB in the near-term to support the struggling economy.</p> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=ojfK4X"></img></a></p> </article> <article> <h1>End of the Dollar Carry Trade</h1> <p>4x-news — Sun, 26 Oct 2008 11:35:54 +0000</p> <p>One can usually assume that any talk of the carry trade is in reference to the Japanese Yen. In this case, however, it is the Dollar that is being driven by a shift away from the popular strategy of borrowing in one currency and investing the proceeds in assets dominated in another. In explaining the recent Dollar rally, analysts have tended to focus on the pall of risk aversion that has descended upon global capital markets, coupled with the spread of the credit crisis from the US to the rest of the world. While these are certainly contributing factors, perhaps they should also look at the repatriation of Dollars that were initially sent abroad over the last decade in search of loftier returns. Hedge funds and other institutions, including those based outside of the US, took advantage of record-low interest rates to borrow Trillions of Dollars and invest them abroad. Due to a combination of margin calls and client “withdrawals,” however, such investors have been forced to not only unwind such positions, but return the proceeds of the US. The Guardian UK reports:</p> <blockquote dir="ltr"><p>Data collected by the Bank for International Settlements shows that European and UK banks have five times as much exposure to emerging markets as US and Japans banks, with surprisingly big bets in Latin America and emerging Asia - where they rely on dollar funding rather than euros.</p></blockquote> <p><a href="http://feeds.feedburner.com/~a/4x-news?a=Aqns4e"></img></a></p> </article> </main></body></html>