Will the Dollar Rebound in 2010? by Arnaud K Fox
It is true that the general view is that the U.S. dollar was the "scapegoat" of the foreign exchange market in 2009. However, as take a closer look, we realize that the U.S. dollar actually strengthened against some currencies.
As the currency traded around the world, it is important for us to understand the behavior of the U.S. dollar a little more.
In the current economic climate, U.S. dollar strengthened in two ways:
1) Good U.S. economic data
2) The bad news affecting the world
Interestingly, the last month and a half saw both scenarios play out:
Good U.S. economic data
In the first week of December 2009, traders around the world were waiting to see non-farm payroll figures. The expectations were high. In fact, retailers around the world was expecting the figures from 125K to 135K. After his release, 11K job cuts "fly", even the most optimistic estimates. This sent the dollar at a rally.
In addition, recent data showed jobless claims that initial claims for unemployment benefits fell to its lowest level since July 2008 last week that U.S. companies retracted further cuts at the end of the year.
The bad news affecting the world
The recent news about potential default of Dubai World billions of dollars shocked global markets. That episode saw the U.S. dollar strengthened against most major currencies. The reason is attributed to "safe haven status" of the dollar that makes traders around the world to "sell first, buy dollars, think later."
More recently, the reduction of credit for countries like Ireland, Spain and Greece have certainly helped the dollar extend its gains.
Close, 2009
Towards the end of 2009, it appeared that the U.S. dollar "Had turned a corner", with its impressive achievements. However, it would be prudent to note that what happened was a typical case in the year-end trade. Most traders and fund managers tend to close their positions for the holidays this year, leaving little activity in the Forex Market.
Therefore, with low liquidity important orders volatility could cause significant changes. In addition, at the beginning of the new year, many U.S. dollar contracts re-start again supporting increased U.S. dollar earlier this year.
Dollar strength for 2010?
My general feeling of the U.S. dollar in 2010 is mainly downward against other major currencies. Undoubtedly, Bernanke and Geithner have gone several times in the force, saying that "support a strong dollar." Furthermore, recent data seem to justify The dollar has indeed turned the corner.
However, further analysis, the recent strength of the dollar is not backed by fundamentals. Unemployment and budget deficits are at record levels and house prices are still falling. Debt also has skyrocketed with the cost of massive government stimulus.
Are things better? I'm sure.
In fact, based on federal funds futures, the market is discounting a rate hike by the U.S. central bank in the second half of this year. There is currently a 57% chance of a rate hike at the June meeting followed by a 80% chance of a hike in August.
However, Forex is always a game of one currency against another. " The probability of beating other currencies the dollar remains in 2010.
In summary, the strength of the dollar will continue temporarily, but returns as the risk, the dollar exhibit inherent weakness against other major currencies most of 2010.
These include the Euro (EUR), Swiss franc (CHF) and other commodity currencies like the Australian (AUD), kiwi (NZD) and Canadian dollar (CAD).
Asian currencies in 2010 Outlook
In general, traders will continue to collect signals from weak dollar and returned to capitalize on emerging markets and Asian currencies in 2010.
For 2009, many Asian currencies exceeded The increase in exports
4) Increased domestic consumption
5) When high inflation becomes a problem
Any early appreciation of the Yuan could derail sustainable economic recovery, by attracting "hot money" and ultimately lead to inflation.
The good news however is that senior Chinese officials expressed their intentions are indirectly agreed to gradually step up the tightening of monetary policy.
Therefore, in late 2010, the yuan should appreciate by about 2% -3% against the dollar.
