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From Leader to Laggard: Is it Time to Bet Against the U.S. Dollar?

The U.S. dollar has been one of the world's strongest currencies in the first part of 2010, posting double-digit gains through the end of May.

And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.

In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.

But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.

To see why the dollar could roll over - and to see how to play it - please read on ...

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China's Exports Surprise Contradicts the Critics

Chinese exports in May posted a 50% gain over last year, blowing away estimates and suggesting that the risk of a Chinese economic slowdown is overblown, Reuters reported, citing anonymous sources.

China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.

Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.

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Is the Plunge in Commodities a Bear Market Signal for Stocks?

The biggest slump in commodity prices since 2008 is undermining confidence on Wall Street and fueling speculation that a new bear market has been born.

Despite forecasts for accelerating economic growth and higher prices, commodities, with the notable exception of gold, are taking a big hit.

The Journal of Commerce (JOC) Commodity Index that tracks the growth rate of steel, cattle hides, tallow and burlap plunged 57% in May, the most since October 2008 - something that gave analysts a sense of déjà vu.

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These Five Inflation Plays Will Provide Protection and Profits

Inflation hawks have been warning since 2008 that the spurt of U.S. money creation that began at the end of that year would spark a surge in consumer-price inflation.

And yet the consumer price index (CPI) statistics remain quiet - not giving ammunition to the deflationary camp, but making "inflationists" look silly, as well. Now, however, it is becoming obvious that inflation will soon arrive. But this time it is sneaking in through the back door - courtesy of our emerging-market trading partners.

Fortunately, there are some very clear steps that investors can take to protect themselves from this expected inflationary surge.

To learn about five investments that can battle inflation even as they fatten your portfolio, please read on...

Global Airline Industry Rebounds, Will See Profit in 2010 From Recovering Economy

The International Air Transport Association (IATA) yesterday (Monday) raised its airline industry outlook and now expects airlines to post a $2.5 billion profit in 2010, recovering from two years of ailing business.

The IATA said increasing passenger travel, a climb in cargo trade, and effective cost cutting measures will contribute to accelerating the industry's rebound.

"The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated. Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black," IATA Director General Giovanni Bisignani said.

Previous industry predictions forecast a $2.8 billion loss. However the IATA revised its expectations for passenger traffic and cargo volume. Passenger traffic will grow 7.1% this year, up from the IATA's original prediction of 5.6%, and cargo volume will grow by 18.5%, up from the earlier estimate of 12%. Total revenue for the industry will be about $545 billion, up 13% from $483 billion in 2009, the group said.

Moody's Investors Service upgraded the industry's outlook Monday to stable from negative, saying they "expect profitability in the global airline sector to improve as we gain distance from the 2009 trough of the recession."

Bisignani cautioned that the recovery is fragile and that labor unions must prepare for more budget reductions.

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Top Profit Plays for a Defensive-Investing Portfolio

Prussian military theorist Carl von Clausewitz once said that "the best defense is a good offense." Although that bit of wisdom has been used everywhere from the battlefield to the gridiron, it could just as easily be deployed as part of a "defensive investing" strategy.

And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.

With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.

For the full text of the interview, please read on...

Global Recovery Gaining Momentum, but Obstacles Remain

The Organization for Economic Cooperation and Development (OECD) announced yesterday (Wednesday) that it has lifted its economic growth outlook, but warned that governments must enforce strict fiscal policies to sustain the global recovery and balance global expansion.  

The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.

The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.

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Why the Yuan Won't Be an Issue at the U.S. China Summit

The United States rolled out the big guns for the second Strategic and Economic Dialogue (S&ED) with China since the Obama administration took office. The two-day talks began yesterday (Monday) with such luminaries as U.S. Treasury Secretary Timothy F. Geithner, Secretary of State Hillary Clinton, and Federal Reserve Chairman Ben S. Bernanke taking part in the Beijing summit.

The last Strategic and Economic Dialogue between the world's largest and third-largest economies was riddled with bickering over currencies and the placing of blame for the global recession. However, officials on both sides of the Pacific this time around have taken a more tempered approach in the hopes that more productive talks will emerge.

U.S. officials will undoubtedly make addressing the value of the yuan a priority, but if the meeting's cordial opening is any indication, they will do so humbly. That tactic would be well advised, considering the issue of currency valuation has been a major point of consternation between East and West.

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China Boosts Treasury Holdings as European Debt Contagion Sparks Investor Shift to U.S. Securities

China increased its purchases of U.S. Treasuries for the first time in six months in March as concerns about European debt contagion sparked an influx of foreign investments into dollar-denominated securities.

China's holdings of U.S. Treasury securities rose by 2% to $895.2 billion, the first increase since last September, as the Asian juggernaut cemented its position as the top holder of U.S. government debt, according to the monthly Treasury International Capital report, known as TIC. The boost follows net sales of $11.5 billion in February.

Japan, the second largest holder of Treasuries, also was a net buyer in March, lifting its portfolio holdings to $784.9 billion, from $768.5 billion in February.

China's purchases were reflective of a deluge of foreign investment in U.S. debt securities as concerns about a European debt contagion and a rebounding U.S. economy sparked greater interest in purchasing U.S. corporate debt.

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China Continues Its Run on African Commodities With $23 Billion Nigeria Oil Deal

China signed a $23 billion oil deal with Nigeria Thursday, reducing Nigeria's fuel imports and positioning China within reach of high quality African oil reserves.

China State Construction Engineering Corporation Limited (CSCEC) signed the deal to build three oil refineries with Nigerian National Petroleum Corporation (NNPC), which said this could be the biggest deal China has ever made with Africa.

Nigeria, Africa's leading oil producer, imports about 85% of its fuel because of the poor condition of its refineries. Shehu Ladan, head of NNPC, said at the signing ceremony that the added refineries would reduce the $10 billion spent annually on imported refined products.

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Can Corn Prices Make a Comeback?

Corn prices have slumped some 24% since January and more than 50% since hitting a record high $7.65 a bushel in June 2008. Now they are being further threatened by potentially the largest corn harvest in history.

Still, there's reason to believe that corn prices will rebound.

The summer season could be particularly harsh following a better-than-average spring, and rumors that China is gearing up to make a huge purchase so far has helped keep corn prices afloat - and could even send them higher. But before that happens there are some substantial headwinds for the crop to overcome.

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The Greek Debt Crisis Will Slow the Yuan's Advance

Poor Tim Geithner.

Pushed by angry U.S. legislators anxious to brand China as a "currency manipulator," the U.S. Treasury secretary tried to strong-arm China into revaluing the yuan - all because of an assumption that the Asian giant wasn't allowing its currency to appreciate.

Unfortunately for Geithner, those efforts were stymied by a flood of data that actually demonstrates that China's currency has significantly appreciated against the already-wheezing greenback.

To find why China should not revalue the yuan, please read on...

High Oil Prices: Four Ways to Profit From the Looming Zoom

Let's face it: Over the long haul, oil prices are headed higher -probably much higher. For U.S. consumers, high oil prices will represent a major challenge. For investors, however, those same high oil prices could stand as the profit opportunity of a lifetime. Read this report from Money Morning Executive Editor William Patalon III, and find out how high oil prices could shoot your portfolio to new highs.

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China-U.S. Trade Relations Plagued by Protectionism

China yesterday (Wednesday) slapped the U.S. chicken industry with the second set of tariffs in less than three months, further escalating tensions with its all-important Western trade partner.

China's commerce ministry said the new tariffs, which will impose charges of as much as 31.4% on imports of U.S. chicken, were a response to what it said were subsidies that created an unfair advantage for U.S. chicken producers.

China in February imposed a 105.4% duty on imports of U.S. poultry after a government investigation found that such products were being sold by the United States at less than the fair value. The new tariffs could altogether close off the market to U.S. poultry producers.

China and the United States have a long history of trade disputes, but these conflicts in recent years have escalated in both frequency and intensity as the two nations vie for global influence.

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The Winners and Losers in the 'Commodities New World Order'

In the "commodities new world order," commodity producers will be king.

Investors who need proof need only consider recent events. Iron ore prices are at record levels, and the annual-price-setting arrangement has broken down. Venezuela President Hugo Chávez has signed "dark side" agreements with Russian Prime Minister Vladimir Putin for Russian companies to develop Venezuela's oil-and-mineral resources. China may have invested $1 trillion or so in U.S. Treasuries, but the Asian giant's only truly successful investment so far has been the 17% stake it took in Canadian-resources player Teck Resources Ltd. (NYSE: TCK).

Welcome to the commodities new world order. These events serve notice that - as we put the global financial crisis behind us - the commodity "haves" will set the agenda ... while the commodity "have nots" will fall farther and farther behind.

To discover the identities of the new-world-order winners – and losers – please read on...