Wednesday, December 17, 2008

Dollar Carry Trade Version 2.0

I detailed just over a week ago that I was not bearish on the dollar long term, but...

I do think some / a lot of the move we've seen over the past few months was largely due to the deleveraging of global investments, and I do expect that to reverse in the coming months.
And here we go...

I actually see this as a positive sign that global markets are returning to some normalcy. When interest rates are practically zero and the printing press is in the process of being warmed up, investors SHOULDN'T WANT TO INVEST in the dollar.


  1. I suppose that does make sense. But the market priced in the Fed's cuts very quickly (before the announcement) and the other inflationary actions are unlikely to spur any real inflation until the velocity of money returns (i.e. lending). In the interim, you have a short-term oversold DXY, and where can the Fed take rates from here? Compare that to the rest of the world, Eurozone, China, etc., who have yet to ratchet rates down much further in spite of lip-service to the contrary. That speaks favorably to the relative USD picture.

  2. Agree, which is why longer term I am not bearish on the dollar like some. This was likely just a reversal of the dollar rally, which was due to the deleveraging process.