Is The Dollar Rally A Head Fake?


	Is The Dollar Rally A Head Fake?

ClipperPaul

5-29-2008 12:24 PM

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://www.clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/bf5d24f2-602e-4684-9bea-a1de86bc7c62/F1E15981-7D48-4333-A28E-7A2994817D53/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html" href="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html" style="font-size: 11px;">www.nakedcapitalism.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html">The dollar rose today, and <A href="http://www.bloomberg.com/markets/commodities/cfutures.html">gold has fallen below $900</A> as f this writing due to <A href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aq6uHA2sb5Dc&refer=home">revisions in the first quarter GDP release</A> that increased growth from "anemic" to "slightly less anemic".</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html">The continued rally in the dollar is due to a perception that the Fed might start raising interest rates sooner rather than later. As much as I think that would be the better course of action (<A href="http://www.nakedcapitalism.com/2008/05/former-fed-economist-central-bank-using.html">see here for why</A>), those views seem overdone.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html">The big reason is the Fed is very concerned about the housing market. Low short rates will reduce ARM reset shock. ARM resets peak in August and continue at high levels through 2008:</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.nakedcapitalism.com/2008/05/is-dollar-rally-head-fake.html">The second is that 0.9% nominal growth, a contraction in real terms, hardly indicates that the economy is out of the woods. As long as the economy looks to be at risk of falling into a recession, it will take more courage than the Fed has shown thus far to increase interest rates.</blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/F1E15981-7D48-4333-A28E-7A2994817D53/blog/" title="blog or email this clip"><img src="http://content8.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>

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