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The Dollar Looks Ready to Rally
Barron's ^ | 29 April 2008 | By KOPIN TAN

Posted on 04/27/2008 3:01:19 PM PDT by shrinkermd

When the Federal Reserve cuts interest rates for a seventh consecutive time this Wednesday, it will begin to wind down a pernicious campaign that has flooded the market with cheap dollars since last summer. At the same time, the whoosh of air from Europe's deflating credit bubble puts new pressure on the European Central Bank to begin cutting borrowing costs in order to goose growth.

The strategy shifts by central banks will drive a greenback comeback against the overpriced euro, turning back the 15% slide that since August has lifted the euro -- to a record $1.60 last week -- even as the dollar continues to struggle against the undervalued currencies of Asia.

Monetary policy isn't the only catalyst for a healthier dollar. "A lot of what has happened since last summer also is emotional, and that can change on a dime," says James Paulsen, Wells Capital Management's chief investment strategist. Among other drivers: mounting evidence that the credit crisis loosening its grip stateside is still tightening across the Atlantic, and a growing belief that the U.S. economy could bottom and rebound before Europe's.

The rehabilitation, ironically, is driven by a weak dollar, which makes bargains of our exports, fills Manhattan's 65,000 hotel rooms with European tourists, and entices foreign giants from Ikea to Toyota to open factories here to exploit our increasingly cheap labor.

Already, the dollar has begun to strengthen against commodity-driven currencies from the Canadian loonie to the South African rand, and odds are it is close to a bottom against the euro, sterling and most developed-world currencies. On top of that, "negatives about the dollar are more fully discounted compared to the potential positives," says Marc Chandler, Brown Brothers Harriman's currency strategist, who expects the euro to pull back to test the $1.40 threshold this year

(Excerpt) Read more at online.barrons.com ...


TOPICS: Business/Economy; Editorial; Politics/Elections
KEYWORDS: currency; dollar; dollarrally; economy; euro; fed
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1 posted on 04/27/2008 3:01:20 PM PDT by shrinkermd
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To: shrinkermd

What will Glenn Beck do if this happens?


2 posted on 04/27/2008 3:04:24 PM PDT by aft_lizard (born conservative...I chose to be a republican)
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To: aft_lizard
What will Glenn Beck do if this happens?

Shop in Canada.

3 posted on 04/27/2008 3:24:45 PM PDT by fanfan ("We don't start fights my friends, but we finish them, and never leave until our work is done."PMSH)
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To: shrinkermd; GMMAC; Clive; exg; kanawa; conniew; backhoe; -YYZ-; Former Proud Canadian; ...
FYI.


4 posted on 04/27/2008 3:26:19 PM PDT by fanfan ("We don't start fights my friends, but we finish them, and never leave until our work is done."PMSH)
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To: shrinkermd

So how does this person explain how the US economy will recover so soon when housing prices are still going down in most areas of the country, commercial real estate has just started its downslide, and the avalanche of heloc and consumer debt downgrades is likewise nowhere near its bottom ?


5 posted on 04/27/2008 3:34:15 PM PDT by nicola_tesla ("Life is Tough... It's Worse When You're Stupid".... John Wayne)
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To: aft_lizard

LOL!!!!


6 posted on 04/27/2008 3:39:41 PM PDT by hippyhater
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To: nicola_tesla

I really think the housing problem is regional. We lost 10% when we sold in Dearborn, MI, but didn’t get a break when we moved to Louisville, KY. Houses are selling here, and the prices aren’t that much lower. Especially, in the higher prices houses. With people moving in from elsewhere, our housing market is still doing okay.


7 posted on 04/27/2008 3:46:45 PM PDT by KYGrandma (The sun shines bright on my old Kentucky home)
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To: nicola_tesla

Recover? Most of the country is not in bad shape.


8 posted on 04/27/2008 3:49:22 PM PDT by bert (K.E. N.P. +12 . Never say never (there'll be a VP you'll like))
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To: KYGrandma

I agree with you that the market is local - there are pockets doing just fine and then there are total disaster scenarios like Fl, CA, NV and so on.

However, the places that haven’t seen a big downturn seem to be confined to locales that didn’t have a big runup from 2000-2006.


9 posted on 04/27/2008 3:56:52 PM PDT by nicola_tesla ("Life is Tough... It's Worse When You're Stupid".... John Wayne)
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To: aft_lizard

Spend his revalued dollar on more hemorrhoid chiselin’.


10 posted on 04/27/2008 3:59:18 PM PDT by redstateconfidential (If you are the smartest person in the room,you are hanging out with the wrong people.)
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To: bert
The economy will start to rebound sometime in late November after the Democrats have taken full control of the Executive and Legislative branches. The Drive-Bys will credit the new domestic order as responsible for the upturn, and the electorate will pat their backs for making such a "smart, progressive" decision.

May God have mercy on us...

11 posted on 04/27/2008 4:00:19 PM PDT by COBOL2Java ("McCain is a war hero. He's also a useful idiot for the Democrats." - Mark Levin)
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To: nicola_tesla
However, the places that haven’t seen a big downturn seem to be confined to locales that didn’t have a big runup from 2000-2006.

I think all you're really saying here is that some markets are more volatile than others and I think that has always been true.

12 posted on 04/27/2008 4:01:28 PM PDT by johniegrad
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To: bert
Recover? Most of the country is not in bad shape.

Are you kidding? It's an election year with a Republican President in office! Things are horrible! Just like 2004! /s

13 posted on 04/27/2008 4:02:33 PM PDT by ETCS
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To: shrinkermd
That's right. Our $600 starts coming in this week and we'll all be RICH RICH RICH!!!! WOOO HOOOO!!!!

/sarc

14 posted on 04/27/2008 4:04:25 PM PDT by LiberConservative ("Typical" White Guy)
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To: shrinkermd

But the dollar is supposed to go to zero while the Euro, Yen and Swissie soar. No, really. I read right here on Free Republic. LOL.


15 posted on 04/27/2008 4:04:48 PM PDT by groanup (Politics, dog ticks, wood ticks and bed ticks. They're all parasites.)
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To: shrinkermd

I’ve seen many springs arrive since I became an adult and began hearing the manure spread by the RAT party. It always is the same. The RATS spread doom and gloom until our enemies abroad as well as at home begin the oil price run up, the price of gold goes through the roof and the currency speculators drive down the dollar while other speculators screw over any commodity that they possibly can.

Remember the gas lines during the Jimmah Quadafi Carter era, this is a repeat of the very same crap, much spread by the same large piece of fecal matter Teddy Kennedy.

Right Turns Tight Lines
CAddis


16 posted on 04/27/2008 4:18:20 PM PDT by palmerizedCaddis (McLame can win without carrying N. Carolina? In the moron's dreams!!!!!)
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To: bert

Not yet and I hope we avoid it getting any worse, but read this for some very frightening numbers.

http://www.generationaldynamics.com/cgi-bin/D.PL?s=4xTZXM&d=ww2010.weblog

Go to this website and start reading at the heading “Credibility and asset writedowns”


17 posted on 04/27/2008 4:19:58 PM PDT by nicola_tesla ("Life is Tough... It's Worse When You're Stupid".... John Wayne)
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To: nicola_tesla

If the article is right this would be a good time for euros to invest in American real estate.


18 posted on 04/27/2008 4:20:02 PM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: shrinkermd

OBTW

Jimmah’s retard cousin RoyBoy is running for congress against Virginia Fox here in North Carolina. Isn’t there a sewage treatment plant any palce that can rid us of this Carter filth.

RoyBoy for Congress 08.

Find out about this piece of dog manure, he is really foul.

Caddis


19 posted on 04/27/2008 4:23:55 PM PDT by palmerizedCaddis (McLame can win without carrying N. Carolina? In the moron's dreams!!!!!)
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To: johniegrad

True. I’m also saying that for long term sustainability, the median price of a house can’t be any greater than 2-3x the median salary/income in any given area. The old 20/80/36 formula worked well for decades - 20% down, borrow 80%, house/insurance/tax costs no more than 36% of income.

There are a lot of areas that have a long way to go down before this is reached.

Selling houses for 500k+ to people making 50k-100k with 0% down and optional principal payments for the first few years was never a good idea.


20 posted on 04/27/2008 4:25:05 PM PDT by nicola_tesla ("Life is Tough... It's Worse When You're Stupid".... John Wayne)
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