Theories on why Dollar is Strengthing vs Peso

The reason that the dollar is strengthening against all other currencies is due to the rush of Americans buying Treasury bonds to protect their money from US banks. The fundamental strength of the Dollar is currently being artifically stimulated by this group fear.

In my opinion this is short term and we will see in the next two months it will lose value and fast.
 
Please, correct me if I am wrong, but if Americans take their dollars from bank accounts and buy US Treasuries, dollar is not supposed to be affected at all.

There must be another part in a different currency. Banks liquidating european assets and taking money back to the States, for example. Or Europeans buying US Treasuries.

Basically people are placing a bet that in difficult times it is safest to stay with the biggest economy.

Alternatively you can place a bet that Argentina has better chances, because it is relatively isolated from the outside world and the economy is agriculture based.

And who knows who is right :)
 
I remember reading this 2 years ago and thinking this guy is making some sense and this is what he wrote in 2006. I do not hope that this comes true but there are some strong parallels to what is currently happening.

Economic Earthquake
Robert R. Prechter, President of Elliott Wave International and author of 'At the Crest of the Tidal Wave' and 'Conquer the Crash,' calls for "a slow motion economic earthquake that will register 11 on the financial Richter scale.
The Great Asset Mania of recent years is in its final euphoric months and the next event will be a sharp decline of historic proportion in stock prices - the Dow should fall to below the starting point of its mania which was 777 in August 1982 and probably below 400 by no later than 2008 - resulting in a deep economic depression lasting until about 2011. If an across-the-board deflation occurs, which has a substantial probability, then real estate, commodities and all bonds issued by other than those rated AAA will fall in value as well. That we are in the midst, and apparently near the end, of the greatest debt build-up in world history suggests that the resulting deflation and depression will be the biggest deflation in history by a huge margin. A corollary of deflation will be a soaring value for the U.S. dollar, contrary to virtually all current expectations. Credit expansion is a major reason why stocks have kept rising and the dollar has kept falling but when the bubble begins to deflate, the investment markets will go down and the dollar will start up. The period after the market crash will be the most vulnerable in terms of the potential for hyperinflation. The ultimate result will be the destruction of any value remaining in bonds and the wipe-out of all dollar-denominated paper assets."
 
pericles, you might want to head back to the library for a bit. i traded currency for barclays in london for years and the stuff you´re putting up here makes no sense. currency market is the biggest and most liquid in the world. trillions of dollars move everyday. you really think americans buying treasury bonds is going to artificially stimulate the dollar? c´mon!! this bull market for the dollars has legs and it will continue to run.
 
Hi are you one of the Barclays boys who messed it up .............Can you tell me since you have worked in Currency markets how the American Dollar is going to continue to strengthen long term when they are printing trillions of dollars to finance bailout after bailout and now the USA government is going to print trillions more in the case that the Banks collapse there and guarantee savers deposit . It takes no rocket science to see that the value of the dollar will sink in the long term

And regarding my comment about Treasury Bonds a quick search on Google showed many links by wiser minds than mine who have said exactly the same thing . I suggest that you take a look,

Loonie takes steepest one-day dive ever, trading extremely volatile

1 day ago
TORONTO — The loonie posted its biggest one-day decline on record Friday, falling almost five cents against the American dollar at one point, but began to rally in the last half-hour of trading.
The dollar fell as much as 4.87 cents in the afternoon to trade as low as 82.41 cents US, according to the Bank of Montreal's currency desk.
However, the dollar's value continued to bounce wildly. It had recovered more than 1.5 cents from its low within minutes. The loonie was at 84.28 cents US at 3:30 p.m., down three cents from Thursday.
The loonie has now lost more than one-quarter of its value since hitting an all-time peak of 110.3 cents US last November, after a rapid three-month rise that began in the summer of 2007.
According to the Bank of Canada's exchange rate website, the dollar hasn't fallen more than 3.38 cents US in one day in modern history. That occurred June 21, 1961.
The dramatic fall of the loonie this month reflects the impact of lower commodity prices, especially oil, along with weak economies around the world and concern that even Canada's sturdy banks are being effected by a global credit crunch.
An economic note from Scotiabank said the loonie is "showing no signs of ending its losing streak against the U.S. dollar."
The loonie is also being sideswiped by rising demand for the U.S. dollar as the United States government tries to borrow heavily in global money markets to finance its $700-billion bailout of banks.
Ironically, the greenback is currently in huge demand because of the U.S. troubles and global economic uncertainty.
Fund managers from around the world are buying up U.S. Treasury bills - historically considered one of the most conservative investments - and need American currency to do so.
That has resulted in a strengthening of the greenback against other currencies this month, including a drop of nearly 10 cents US for the Canadian dollar since it closed at 93.97 on Sept. 30.
However, Jayson Myers - an economist who now heads the organization that represents Canada's manufacturers and exporters - said the Canadian dollar may bounce back quickly.
"The forces that are pushing up the U.S. dollar right now may not be permanent," said Myers, president and chief executive of Canadian Manufacturers and Exporters.
The Canadian dollar's fall may be followed by a rapid rise if the U.S. economy goes into a major recession or if foreign investors "find a better place to put their money than in U.S. dollars."
"It's just guesswork right now for anybody. I don't know if anybody can really forecast where the dollar is going," Myers said.
The loonie's plunge Friday came despite a report from Statistics Canada that the country generated a record number of new jobs last month and more support for the financial system from Ottawa.
On Friday, Finance Minister Jim Flaherty announced that the federal government will buy up to $25 billion in residential mortgages held by the chartered banks, to give them another source of cash.
The transaction will be made through the Canada Mortgage and Housing Corp., a federal Crown corporation, which has already guaranteed the mortgages originated by the banks. The CMHC is scheduled to make its first purchase of up to $5 billion on Oct. 16.
If the loonie stays at current levels it will make imports of everything from Florida fruit to Boeing jetliners more expensive to Canadians and raise the costs of winter vacations in the United States.
It will also provide some relief to hard-pressed Canadian manufacturers, squeezed for the last two years as the strong currency made Canadian lumber, newsprint, machinery, furniture and other products more costly in the United States market.
However, the volatile trading in the currency makes it difficult for companies and consumers to adapt to such rapid changes.
For companies that have contracts in place where they're paid in U.S. dollars, the fall of the Canadian dollar is good because they'll get more loonies at the current exchange rates.
The higher American dollar will also lower the cost of raw materials and energy required by manufacturers to make and transport their goods.
But the bad news is that the U.S. economy is weak, Myers said.
"Even though the (Canadian) dollar is down and the cost of doing business is down, if your customers aren't buying you still don't have the business," Myers said.
 
pericles said:
Hi are you one of the Barclays boys who messed it up .............Can you tell me since you have worked in Currency markets how the American Dollar is going to continue to strengthen long term when they are printing trillions of dollars to finance bailout after bailout and now the USA government is going to print trillions more in the case that the Banks collapse there and guarantee savers deposit . It takes no rocket science to see that the value of the dollar will sink in the long term
My financial and economical knowledge is limited, however as an Argentine, I have never seen our so many times devaluated currency gain strenght after so much printing... I would like to hear why the dollar will be any different (???)
 
Good point Nikad. The only thing I can think of is "nunca se sabe en Argentina, vamos a ver"
 
jdgabb6d said:
c´mon!! this bull market for the dollars has legs and it will continue to run.

Why? Have the fundamentals of chronic current account deficits changed? If not, why will the dollar defy gravity?
 
In yesterday's Herald columnist Martin Gambarotta wrote: "The government is under extreme pressure from business leaders and farm lobbies to devalue the peso drastically - especially because neighboring Brazil's currency has depreciated roughly forty percent overnight because of the bust..."
 
A lot of people are selling pesos and buying dollars, so that might contribute. If the US continues to print money like crazy the dollar will come down.
 
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