Interest Rate Roundup

Friday, May 08, 2009

Dollar plunging and its implications



Forget the stress test. The big story in the markets today is the plunging dollar. The Dollar Index is getting crushed, down 1.27 points to 82.66 at last count. For you technically inclined readers, it's also plunging through its 200-day moving average.

What's going on? The positive read is that this move signals a return to risk taking. Investors are selling the dollar because they no longer are flocking to safe havens.

The negative read? That the Federal Reserve and Treasury Department are completely out of control when it comes to banking bailouts, money printing, borrowing, and spending. We now have both falling bond prices and a falling dollar. If gold starts heading toward and through $1,000 an ounce as well, it will be a trifecta of signals that investors are losing faith in U.S.-denominated assets. My take, anyway.

2 Comments:

  • Mike,
    If the stock markets start to tank again, what should we do with Gold stocks and mutual funds like MIDAS? Last stock market crash pulled them right down with he rest of the bad stocks, even though gold did not crash that much.

    http://www.safehaven.com/article-13300.htm

    By Blogger Thom H, at May 10, 2009 at 3:50 AM  

  • I think we may see some pressure on equities and falling yields/rising $ for the next month or so.

    Gold will correct sharply over the next few months. Call me a conspiracy theorists, but that is how they'll confiscate Gold. Drop prices, buy it and make people give it up exactly when people should be buying it.

    By Blogger Shankar, at May 10, 2009 at 1:42 PM  

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