{"id":101,"date":"2009-09-18T12:37:39","date_gmt":"2009-09-18T17:37:39","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=101"},"modified":"2009-09-18T12:37:39","modified_gmt":"2009-09-18T17:37:39","slug":"still-waiting-for-the-dollars-relief-rally","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2009\/09\/18\/still-waiting-for-the-dollars-relief-rally\/","title":{"rendered":"Still Waiting for the Dollar’s Relief Rally"},"content":{"rendered":"

Last week I decided to short the pound vs the U.S. dollar<\/a> despite the fact that the relief rally I expect in the dollar had not yet begun. One week later, there remains no relief in sight for the dollar, but the pound has fared even worse. I am of course grateful that I chose the weakest currency of the bunch to play against the dollar.<\/p>\n

With the pound now “close enough” to the bottom of an almost 4-month trading range, I decided to close out all positions short the pound (I actually closed out my long on the euro against the pound several days ago and missed out on some sizable additional gains in the process). I will look to fade any significant bounces, but overall, I will remain extremely cautious ahead of Wednesday’s release of the Bank of England’s minutes and another Federal Reserve interest rate decision.<\/p>\n

I still think the Bank of England wants the pound to go much lower, and I will be looking for more concrete evidence of that in the minutes. For example, what were the material discussions, if any, around implementing negative interest rates?<\/p>\n

Given the continued rise in global stock markets and declarations celebrating the worldwide end of recessions, we should hear speculation in the two days leading up to the Federal Reserve meeting focus on the timing of higher rates in the U.S. This alone could<\/strong> provide some support to the dollar, but not enough for a significant relief rally. (The new Japanese government seems to support a stronger yen, and the dollar seems to be an increasing funding source for the carry trade. These two forces alone are enough to keep the dollar index suppressed.) I expect the Federal Reserve to stay committed to easy monetary policy. I also expect the Fed to reassure the markets that it has no intention of raising rates anytime soon given increasing weakness in labor markets and a fragile housing market.<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: no positions.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last week I decided to short the pound vs the U.S. dollar despite the fact that the relief rally I expect in the dollar had not yet begun. One week later, there remains no relief in sight for the dollar, but the pound has fared even worse. 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