Dollar bulls are regrouping despite recent dollar warnings from World Bank president Robert Zoellick.
Since then, the Japanese finance minister, French central bank, and Russian central bank have come out in support of the dollar as reserve currency for the world.
Barron’s recently argued that the technicals point to a short-term rally
Nic Lenoir of ICAP (via ZeroHedge) is also bullish
My view does not rely on contradicting the thinking according to which excess liquidity and unbalanced budgets for the government and the consumer lead to weaker currency. But I think that the amount of currency being “retired” with debt not being rolled and the velocity being null is partly countering the excessive printing. Also, one need also to keep in mind that when it comes to currencies all is relative, and while the Fed and the Treasury department are certainly not acting with a strong USD in mind these days, other countries have embarked on a similar path. Last but certainly not least, almost everybody is short USD.
Investors are long commodities as a placement AGAINST the value of the USD, and banks and governments around the world borrow in USD. Germany and Austria have recently issued debt that is USD denominated, and they were soon immitated by… Venezuela. That to me is a sign the short-USD trade is ripe for a reversal, when basically even the biggest idiot in the house is short. The ultimate pain trade would certainly be renewed USD strength.