By Chuck Butler
Good day... And a Terrific Tuesday to you! I hope you all had the opportunity to enjoy a 3-day weekend... I realize that not everyone has the opportunity, so I don't want to sound like I'm rubbing it in... It's really foggy outside this morning. I live in a little river town outside of St. Louis, and we get fog there all the time, but once I cross the river, it dissipates quickly... But not this morning, the fog was with me all the way to work! Something right out of an old-time horror movie with Lon Chaney...
Well... Yesterday, I was doing quite a bit of reading, after suffering "football overload", which by the way, were not very good games... Sure, good for the winning teams' fans, but I didn't have a dog in any of those fights, so I just wanted to see a good game, only to be disappointed... OK, now back to my reading...
I was reading a good, thoughtful story about how currency swings could be dying down, as we return to fundamentals... You know, me... I jumped from my chair, and click my heels together in joy! OK, no, I'm not physically able to do that any longer, so I did it in my mind! But a return to fundamentals? I'm all over that like a cheap suit! One of the fundamentals that the story highlighted that would be taken into consideration by traders, would be interest rate differentials... Which, I've always considered to be a strong reason to own a currency, but not the "end-all"...
There's a currency purchasing program that's called the "Max Yield program"... In the Max Yield program, a currency holder buys the highest yielding foreign currency each year... It may be the same currency come the next year, or it may be different, which would require one to sell / cross one currency for the other, and then hold the new one for one year...
I've never been a HUGE fan of this program... But, there are years that this program kicks tail, and others when it gets sand kicked in its face! So... I just want you all to know that I'm not advocating this program... Just, making you aware of it...
So... Interest rate differentials, eh? Well, that would put the Aussie dollar, Brazilian real, South African rand, Mexican peso, Norwegian krone, and a Johnny come lately, the New Zealand dollar, which will see at least 3 rate hikes before summer, in my opinion that is...
Now, of all those currencies that currently have yield, we could play the old Sesame Street game about one of these things is not like the others... And that would be the Mexican peso, which is about as corrupt a Government as you can get (even more corrupt than South Africa? WOW!), a depleting oil supply, and a close tie to the U.S.... I would be careful here...
Trade commodities or equities from across the globe. Join Now
Of course saying that though doesn't take into consideration the 9.3% gain the currency has made VS the dollar in the last year... Add in the interest, and you've got a better than 10% annual gain in this currency, that I just said to be careful with...
OK... Now, onto other things... Friday's currency trading saw the dollar remain in the driver's seat, and the Big Dog, euro, was not able to regain the ground to 1.44, instead remaining below that figure all day... In yesterday's thinned out Holiday trading, the euro did gain back ground to 1.44 and stayed there all day, and night, until this morning...
This morning, we had German Investor Confidence, as measured by the think tank, ZEW, decline more than economists had forecast for the data in January. German Investors are of the belief that the economic recovery is showing signs of losing momentum... This weak reading of Investor Confidence, caused the euro to fall back below 1.44...
I saw this report, this morning, and said to myself... "self, apparently, these guys can see the trees in the forest, as opposed to the people that the U.S. Consumer Confidence survey contact! But... That's just me...
There are a couple of currencies that have gained VS the dollar overnight... The Japanese yen, even in the face of the announcement that JAL (Japanese Airlines) was going to announce bankruptcy... And the U.K. pound sterling...
Seems the pound sterling is getting some love from those exiting the euro because of the problems in Greece... It's the "euro-lite" currency, that does not have a Greece in its closet... However, the U.K.'s problems have all been taken out of the closet, that we know of, and I still wouldn't touch them with your ten foot pole... But, that's not stopping buyers of pound sterling, as it rises to 1.6380 this morning...
Last Friday... I know, it seems so long ago now... The data cupboard yielded some interesting data... The stupid CPI report came in at +2.7% annual inflation... I have to hand it to the Bureau of Labor Statistics, you know, the people that cook the labor data books, also produce the data on CPI... I have to hand it to them, they had to work long, and hard, to come up with 2.7% annual increase in inflation...
