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Signs Point to Year of the Dollar's Ascent; (USD$)
Topic Started: 29 Dec 2013, 02:46 PM (3,239 Views)
peter fraser
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Signs Point to Year of the Dollar's Ascent
By IRA IOSEBASHVILI
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When the Federal Reserve said it would begin scaling back its easy-money policies next month, it answered currency investors' biggest question of 2013.

Now that the Fed has reduced uncertainty in foreign-exchange markets, some investors are betting on a steadily appreciating dollar in 2014.

The dollar is hovering near its strongest levels against the yen since 2008 and is up 21% versus the Japanese currency year to date. On Thursday, the dollar hit a new five-year high against the yen, trading as high as Y104.85. At the same time, U.S. Treasury bonds fell, pushing the yield on 10-year notes to 3%, for the first time since September. Higher yields on U.S. assets make holding the dollar a more attractive proposition for investors.

The WSJ Dollar Index, which measures the dollar's value against a basket of currencies, has gained nearly 5% since the start of the year.

Many investors and strategists believe the dollar will move higher next year because the Fed is taking the first steps toward tightening monetary policy while other central banks still are easing. Last week, the Fed said it would begin trimming its $85 billion-a-month bond-buying program in January.

Most market players expect the yen to keep weakening against the dollar, as Japan continues to purchase its government bonds to fight chronic deflation and glacial growth. Many also believe that the euro remains vulnerable to the region's moribund economy and political infighting. But it will be the U.S. recovery, which is gaining traction, that will be the buck's biggest driver, said Masato Yanagiya, head of foreign exchange at Sumitomo Mitsui Banking Corp. in New York.

"The stock market is much steadier, Treasury yields are rising, and that's all going to help the dollar," Mr. Yanagiya said. "We expect the dollar to stay strong throughout next year."

To be sure, investors say some uncertainty lingers that could upend the dollar's rise. The Fed didn't say when a complete wind-down of its bond purchases would be completed and promised to keep short-term interest rates near zero "well past" the point when the jobless rate falls below 6.5%. That means the timing and size of further cuts will be determined largely by the strength of economic data, market watchers said.

Still, for many market participants, improving U.S. data, the Fed's stimulus reduction and easy monetary policy in other major economies are too powerful a combination to ignore.

The Fed decision "strengthens our conviction that 2014 will be the year of the dollar," said Aroop Chatterjee, a strategist at Barclays, in a note to investors.
Any expressed market opinion is my own and is not to be taken as financial advice
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Pig Iron
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Bogan scum

this spells doom for the goldbugs.

i wonder how they will conjure the illusion that gold with go up this time?
I am the love child of Tony Abbott and Pauline Hanson
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HardTruths
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Pig Iron
29 Dec 2013, 03:35 PM
this spells doom for the goldbugs.

i wonder how they will conjure the illusion that gold with go up this time?
Why would gold need to go up if the currency it is denominated in is rising? If the dollar really does appreciate (unlikely), it would actually very good news for gold producers, almost all of which are in non US domiciles. As long as gold holds at around USD1200 per ounce, the rising dollar will improve the domestic revenue of gold holders and producers without any change in price. Gold is an easy way to hold US dollars without the credit risk.

Alas, I think the chances of the dollar appreciating next year are slim to none. If the dollar appreciates, the hollowing out of US industry and manufacturing will resume, leading to higher unemployment, and there is no construction industry to soak up the excess labour this time. The higher unemployment would force a dovish Fed to resume free money ... er ... quantitative easing, driving the dollar down again.
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Pig Iron
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Bogan scum

HardTruths
29 Dec 2013, 04:26 PM
Why would gold need to go up if the currency it is denominated in is rising?
because if you are holding gold it means it's dropping in value vs fiat.
HardTruths
29 Dec 2013, 04:26 PM
it would actually very good news for gold producers, almost all of which are in non US domiciles.
domiciles?

it would be good news if the AUD dropped against the USD. you don't seem to be able to separate the 2 issues there dave.
HardTruths
29 Dec 2013, 04:26 PM
BLAH BLAH inevitable crash
heard it all before.
Edited by Pig Iron, 29 Dec 2013, 04:48 PM.
I am the love child of Tony Abbott and Pauline Hanson
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skamy
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Pig Iron
29 Dec 2013, 04:46 PM
because if you are holding gold it means it's dropping in value vs fiat.

domiciles?

it would be good news if the AUD dropped against the USD. you don't seem to be able to separate the 2 issues there dave.

heard it all before.
Do you know that this Hard truth guy is just Peter Fraser's troll, david ? New name-same guy-same trolling, unfortunately I was led into feeding him for a while there.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Pig Iron
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Bogan scum

skamy
29 Dec 2013, 04:52 PM
Do you know that this Hard truth guy is just Peter Fraser's troll, david ? New name-same guy-same trolling, unfortunately I was led into feeding him for a while there.
yep i know, i'll play with him a little longer and dispose of him when i'm done.
I am the love child of Tony Abbott and Pauline Hanson
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HardTruths
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Pig Iron
29 Dec 2013, 04:46 PM
it would be good news if the AUD dropped against the USD.
So, the USD will go up, but the AUD won't go down against the USD?

:bl:

What do you do for a living? I hope it doesn't involve arithmetic.

skamy
29 Dec 2013, 04:52 PM
Do you know that this Hard truth guy is just Peter Fraser's troll, david ? New name-same guy-same trolling, unfortunately I was led into feeding him for a while there.
This forum is the compound interest version of stupidity.
Edited by HardTruths, 29 Dec 2013, 05:11 PM.
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peter fraser
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HardTruths
29 Dec 2013, 05:10 PM
So, the USD will go up, but the AUD won't go down against the USD?

:bl:

What do you do for a living? I hope it doesn't involve arithmetic.
The US Dollar can gain strength against a basket of major currencies, there is a US Dollar index if you look for it on Google.

If at the same time the AUD was also gaining in strength the USD could be rising but still be falling against the AUD.

If you slowed down and thought for a little longer before replying with a confrontational reply abusing everyone, you might start to get some of this. You're capable of it but you're not allowing it to happen.

Slow down and think about what has been said and what you are posting.
Any expressed market opinion is my own and is not to be taken as financial advice
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HardTruths
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peter fraser
29 Dec 2013, 05:28 PM
The US Dollar can gain strength against a basket of major currencies, there is a US Dollar index if you look for it on Google.
I know what the dollar index is.
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If at the same time the AUD was also gaining in strength the USD could be rising but still be falling against the AUD.
That would be a major change in world currency markets. There just isn't the volume of physical trade in the AUD right now for that to conceivably happen. There is the possibility that the RBA raises rates significantly, but I think the chances of that are slim, how about you?
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If you slowed down and thought for a little longer before replying with a confrontational reply abusing everyone, you might start to get some of this.
Yes, the truth is confrontational and honesty is sometimes perceived as abuse. If you think you have something to school me in, then answer my questions instead of dodging them with accusations of being 'dave', whoever that is.
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Slow down and think about what has been said and what you are posting.

I know exactly what I am posting. Some of the things you have written have left me mystified, but as you decline to answer my questions asking for clarification, I am left to assume you can't answer them, so revert to deflection.
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Massive
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peter fraser
29 Dec 2013, 05:28 PM
The US Dollar can gain strength against a basket of major currencies, there is a US Dollar index if you look for it on Google.

If at the same time the AUD was also gaining in strength the USD could be rising but still be falling against the AUD.

historically though AUD typically always weakens against a "strengthening" US dollar and strengthens against a falling USD.

if the USD rises enough and US interest rates increase , it will likely be thought of as a "safe" currency again and money will be pulled off the AUD and into USD ... for the AUD to just keep up with a USD rise and not fall, let alone outpace a USD rise would be a pretty significant shift in the global sentiment of AUD's position in the market...
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