Long Euros? Consider This

The news for trading today is sparse. The
most talked about and least-read item is the article in the London Financial
Times (hereafter known as the FT) by the esteemed Martin Wolf. He is one of
the better journalists on the global scene and his article discusses the dangers
of the persistent dollar decline. The point is one that I have discussed on
Bloomberg TV consistently for the past few months and it details that
intervention from the Asian mercantilists to halt the appreciation of their
currencies is causing pressure to build on the euro, canadian, sterling and
aussie. This is a danger as the euro especially is appreciating beyond the
fundamentals as speculators rush to buy it because it is the point of least
resistance. Hot money is like water or an army in that it seeks to exploit the
point of greatest weakness or least resistance. The market believes that the
European Central Bank (ECB) does not have a mandate to intervene in the currency
markets and so buying the euro becomes the point of least resistance.

Take note of this as it has not been readily tested and it will be interesting
to see how Europe reacts to the Japanese attaining a trade advantage through the
constant intervention by the Bank of Japan (BoJ) to keep the yen from rising.
The Germans and Japanese compete directly for the high-end quality product
market which I refer to as the Mercedes /Lexus tradeoff. This will be the
pivotal action coming into the new year. Also, I will remind you that the Bank
of Norway cut interest rates today as to insure that the kroner stays weak
relative to the euro—-competitive devaluation is on everyone’s minds in the
international arena.

Yra

Yra53@aol.com