U.S. Dollar

Will a Rising U.S. Dollar Keep Climbing?

rising U.S. dollar

The rising U.S. dollar has climbed to a four-year high - but will it continue?

Appearing on the CNBC program "Street Signs" this morning (Wednesday), Fitz-Gerald explained that wobbly economies in places like Japan and Europe will force central banks elsewhere to further weaken their currencies with U.S. Federal Reserve-style easing programs

In this video, Fitz-Gerald takes a detailed look at the rising U.S. dollar and what it means...

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Stay Ahead of This (Massive) Currency Shift

China's political and economic presence surges daily. Lockstep with that surge is the growing significance of its currency.

Along with China's emergence as the world's second-largest economy, its yuan recently displaced the euro and became the second-most used currency for international trade.

Chinese leaders are intent on internationalizing their currency by growing its acceptance, perhaps even challenging the U.S. dollar as the new reserve currency, a trend I've highlighted here before.

To reach that goal, new yuan trading centers are being established.

But the location of the next major trading hub is almost certainly not where you'd expect.

And the implications will redefine the power centers of global commerce... Full Story

Don't Fear China and Japan Owning More U.S. Debt

Alibaba buys Yahoo

The U.S. Treasury Department said today (Thursday) that total foreign holdings of U.S. debt rose 1.1% in November to $5.72 trillion, putting foreign holdings 0.1% below the all-time high of $5.76 trillion it reached in March 2013.

In particular, China's holdings reached record levels, increasing 0.9% to $1.32 billion, and so did Japan, which boosted its holdings by 1% to $1.19 trillion. The two countries are the largest and second-largest foreign buyers of Treasury debt, respectively.

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Why the U.S. Dollar is Rising – And Why It's Still Doomed

Currency Dollar Shot Q

Many have wondered - and rightly so - why the U.S. dollar is rising even though the U.S. Federal Reserve has done just about everything possible to debase the currency over the past five years.

Over the past two years, the U.S. Dollar index, which measures the dollar against a basket of major world currencies, is up by more than 12.6%.

Part of the answer is that most of the world's other central banks have pursued easy money policies similar to the Fed's. In the so-called "currency wars," the U.S. dollar has one major built-in advantage.

"The U.S. has never defaulted," explained Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The world may hate our guts, but when all hell breaks loose, they all love our dollar."

Also helping to explain why the U.S. dollar is rising is that it remains the world's reserve currency - the money a majority of nations use to buy commodities such as oil -- and that the U.S. economy, for all its warts, is in better shape than most of the other developed economies in the world.

"The dollar the best-looking horse in the glue factory," Fitz-Gerald said.

So it wasn't too surprising that when the Fed recently hinted that it might start "tapering" its quantitative easing (bond-buying) policies later this year, the U.S. Dollar index spiked 3.1%.

But Fitz-Gerald said that investors still need to be wary of the stronger U.S. dollar going forward.

This Sept. 2 Event Could Send the U.S. Dollar Crashing

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Don't Bet Against a Surging U.S. Dollar

Currency USD In the midst of a brewing currency war, Japan's out-of-control monetary policy has caused the yen to fall to an almost five-year low against the U.S. dollar.

With an economy one-third the size of that of the United States, Japan has committed itself to a fiscal program that's almost double the U.S. Federal Reserve's current $85- billion a month stimulus.

Like any other war, this battle of monetary-easing measures won't end well, but fortunately for Americans, it's looking more and more likely that the dollar will emerge victorious.

"Right now, the U.S. dollar is the 'cleanest dirty shirt in the laundry,' so I'd buy it," said Money Morning Capital Waves Strategist Shah Gilani.

The dollar now stands at 101.93 against the yen, the first time it's broken the 100 mark since 2009, and is up 26.6% in the past six months.

Many experts are now predicting the dollar's climb has just begun and some analysts see the dollar hitting 105 yen this summer and possibly 110 by the end of the year.

"The turn in yen has been dramatic and has proven the importance of momentum when a multi-year cycle turns," Nomura currency expert Jens Nordvig wrote in a note to clients. "A similar dynamic could be in store for the dollar. In the scheme of things, the USD REER [Real Effective Exchange Rates] is still trading close to multi-decade lows. Once the turn is evident, we believe momentum could be powerful."

Here's why the U.S. dollar's run is just beginning.

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Are You About to Lose Your Savings in the Currency War?

In the Currency War, the "end game" is a race to the bottom. Because really, under a fiat money system, there's nowhere else to go.
Unfortunately, I believe the U.S. is on the same path.
This was just confirmed by Kyle Bass, founder and principal of Hayman Capital Management, a Dallas hedge fund, who has profited handsomely from prescient calls on events from the subprime mortgage meltdown to Greek sovereign debt restructuring. In a recent discussion with a senior Obama official, Bass disclosed that he asked how the U.S. would be able to grow exports if they don't allow nominal wage deflation. The official's answer: "We're just going to kill the dollar."
There is one way to protect your net worth from all these central bank shenanigans. In my view, the answer is to own and accumulate gold.
So I suggest you ignore what central banks say, and instead do what they do...

Is the Japanese Yen Headed for a Long Decline?

Currency drawing small

The Japanese yen has already fallen by more than 12% against the U.S. dollar since Nov. 1, 2012 - and it could still have further to fall.

That's mainly because the Bank of Japan appears likely to go along with the wishes of the Liberal Democratic Party, led by newly elected Prime Minister Shinzo Abe, and step up its attempts to eliminate deflation by using "unlimited easing" and setting a 2% inflation target.

Most of the Japanese yen's weakness we have seen so far stems from aggressive jawboning by Prime Minister Abe and other LDP leaders. And outgoing Bank of Japan Governor Masaaki Shirakawa has appeared likely to go along with Prime Minister Abe's demands for closer cooperation between the government and the central bank.

The Bank of Japan's Monetary Policy Committee (the Japanese equivalent of the Fed's Federal Open Market Committee) is in the middle of a regularly scheduled two-day meeting. It is widely anticipated that the BOJ will agree to additional easing measures - most likely purchases of Japanese government bonds (JGBs) - and will formally adopt the government's 2% inflation target.

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The Fiscal Cliff's Biggest Surprise Could Be a Rising U.S. Dollar

My grandmother Mimi had a saying that was as blunt as it was uncouth. "When the stuff hits the fan," she used to say, "it will not be evenly distributed."

This one came up often when she sensed that world events were about to take a turn for the worse.

You've heard me mention Mimi before. She was widowed at a young age and went on to become a savvy global investor long before people thought to look beyond their own backyard.

Mimi never cared what Wall Street's "Armani Army" had to say.

Instead, she preferred to travel widely to see for herself what the real story was. Having grown up in the midst of the Great Depression, she believed that people were the ultimate indicator and that governments were the penultimate contrarian influence.

If she were still alive today, I think she'd encourage us to take a good hard look in the proverbial "mirror" especially with regard to the looming fiscal cliff making headlines the world over.

And I don't think she'd waste any time with the doom, gloom and boom crowd either.

She was always on the hunt for opportunity when everyone else was running from chaos. Thanks to her, it's a habit that remains firmly ingrained in me today.

Not One but Three Fiscal Cliffs

And that brings me back to the "fiscal cliff."

In my mind, this is a misnomer. There isn't really a singular fiscal cliff . As I explained earlier this summer to Sheryl Nance of Forbes there are actually three.

  • The massive adjustments headed our way as tax and spending cuts expire and come into effect beginning in 2013. You may know it as taxmegeddon.
  • The debt debacle and the near complete lack of any sort of credible financial consolidation plan that will affect everything from interest rates to collateral requirements and the US credit rating - again.
  • And politicians who simply don't understand that issues 1 and 2 are already dramatically impacting the economy long before the theoretical limits of spending come into play. Profits are declining and 61% of companies that have reported through Monday October 22nd have failed to meet expectations. Hiring is slowing and top line revenue is increasingly hard to come by.
Together, they constitute a massive threat to the U.S. economy that could push our beleaguered "recovery" to the breaking point. (And I use all the sarcasm I can muster with that because our recovery isn't anything close to what's needed.)

Many believe this is a moot point because Congress will get down to business in November after the Presidential Election takes place. The hope is that some sort of budget agreement will be reached and that the US economy will then be positioned for stronger growth in 2013.

Yeah and I suppose the tooth fairy will show up, too.

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What to Expect When the Reign of the U.S. Dollar Comes to an End

Lloyd Blankfein has got it all wrong again.

Speaking last week, the Chief Executive of Goldman Sachs (NYSE: GS) claimed that if the "fiscal cliff" of tax increases and spending cuts go into effect on January 1, the U.S. dollar would lose its reserve currency status.

As the Vampire Squid's representatives often do, Blankfein actually has it backwards.

Contrary to what Blankfein thinks, a legitimate movement to deal with the fiscal cliff would cut the federal deficit in half, make the country more or less solvent and strengthen the dollar.

However, the problem is that the fiscal cliff involves pain. And since politicians like to delay pain as long as possible, the chances are good the fiscal cliff will be postponed again.

Instead, the country will likely continue to run trillion-dollar deficits in the hopes that Ben Bernanke can finance them through even more quantitative easing. It's the only play in the Keynesian playbook.

Unfortunately, that is the policy most likely to crash the dollar -- and it's headed our way.

So what will the world look like when the dollar has crashed, and international investors and traders have lost all of their confidence in the greenback?

The truth is if that happens it won't be like anything we've seen within living memory.

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