It’s nice to hear someone talk about the dollar who can look beyond a two week chart, and doesn’t join the pack while yelling BERNANKE IS DESTROYING THE DOLLAR just because the greenback has come sharply off the highs for the year.
If you like a bigger-picture, fresher perspective, listen to BTIG’s Mike O’Rourke, who is just back from a two-week trip to Asia:
Needless to say, there was a great deal of focus on the recent “currency wars” theme that is prominent in the headlines. The focal point of the currency wars debate is the FOMC’s anticipated resumption of Quantitative Easing next month. There is a widespread belief that the U.S. is embarking on a policy of currency debasement. It is a view with which we do not agree. We often found ourselves pointing out that the Eurozone is the second largest economy in the world and despite the Euro’s sharp rally from the depths of its spring sovereign debt crisis lows, it still remains down year to date versus the Dollar. Then there is China’s RMB, which has appreciated modestly versus the Dollar, but everyone believes is still notably undervalued. Those two economies alone represent approximately half of Global GDP ex-US and in one case, the Dollar has appreciated and in the other, it is clearly undervalued.
For some more perspective, here’s a nice multi-year dollar index chart. Yes, the trend has been down, but we’re still above lows made in 2008 and 2009, and a little bit below the lows made in 2005.