Dollar Reached 15-Month Low In Wake Of G20 Meeting

NEW YORK (MarketWatch) -- The dollar fell to the lowest level in 15 months against a basked of currencies on Monday after a weekend meeting of Group of 20 policy makers stressed continued economic stimulus, encouraging investors to move into riskier assets such as stocks and away from the dollar.

Traders also took heed of an International Monetary Fund report issued at the G20 meeting that said the dollar has moved closer to "medium-term equilibrium" but "still remains on the strong side."

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 75.07, -0.60, -0.79%) , a measure of the greenback against a trade-weighted basket of rival currencies, fell as low as 74.930, a level last seen since August 2008. It recently traded at 75.042, down from 75.760 in North American trading late Friday.

The euro pressed back above the psychologically important $1.50 level for the first time since Oct. 26. It struggled to push much higher and recently traded up about 1% at $1.4998, up from $1.4840 on Friday.

The single currency extended its gain after data showed German industrial production rose 2.7% in September.

Earlier, the British pound jumped as much as 1.3% and recently bought $1.6763. The dollar stood at 90.06 Japanese yen, from 89.88 yen on Friday.

So It's Official: IMF / Carry Trades

The Market Ticker
Monday, November 9. 2009
Posted by Karl Denninger in Monetary

You can put a fork in us down the road....

The U.S. currency dropped against 12 of its 16 major counterparts as the International Monetary Fund said traders are probably using the dollar to fund so-called carry trades around the world and it may still be overvalued.

I hope everyone here in The United States takes a moment to understand what this means. Let me lay it out for you:

When the global economy truly recovers oil will skyrocket up to or beyond the $150 where it was in late 2008.
If the dollar is indeed still "overvalued" and going to 40 as many technicians predict, oil will likely reach $300 a barrel.
This will in turn drive gasoline prices north of $6, heating oil will reach $7-8/gallon, and diesel will be commensurate with heating oil.

This will in turn decimate the trucking industry. Now you know why Buffett bought BNI. Many things he may be, but dumb isn't one of them.
Trucks will of course remain for terminal-to-door deliveries but for long-haul they will simply be uneconomic. Those who currently are employed in this business will lose their jobs. All of them.

The middle class will be decimated. Those who live in suburbia, who are primarily middle-class Americans, will find themselves faced with commute costs that are double or more what they pay now.
Those in the middle class who live in the Northeast where heating oil is the primary fuel for winter, where natural gas infrastructure does not exist to replace heating oil, will find themselves choosing between heat and food in large numbers.
What's far worse is that all carry trades eventually unwind and in the history of the markets I have never seen it happen in an "orderly" fashion.
Japan witnessed the destruction of the Yen Carry last year and it was horrific. We will see it in the future - exactly when cannot be predicted with certainty, but that it will happen in an uncontrolled fashion will be.
While this "unwind" will bring relief from sky-high commodity prices it will do so at the expense of asset prices, which will collapse.

[snip]

(Thanks to Freeper Zeddicus for this article. I've decided to post it as a stand alone article if it hasn't already been posted.)

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