The past couple of days the US $ is bouncing, up more than 1% so far. At 75.85 this afternoon, if the US dollar index can close through 76.10 over the next little while that would be significant.
Meanwhile the risk trade is taking a much deserved kick in the teeth:
Dec. 4 (Bloomberg) — “The biggest rally in the U.S. dollar since June snuffed out an advance in commodities and equities as an unexpected drop in the unemployment rate triggered bets the Federal Reserve will lift borrowing costs. Gold slid the most in a year and two-year Treasuries tumbled.” See: Dollar rally erases gains in commodities, US stocks after jobs.
The main risk building for investors the past few months has been precisely this: emerging markets, commodities, gold, equities, high-yield debt, have all rallied violently courtesy of the US carry trade extenuating the falling Greenback.
Whether its bad news of geo-political concerns driving a flight to safety, or good news in a better-than-expected US jobs report this morning, both extremes threaten to buoy up the much maligned dollar just as the masses are so confident of its demise.
If we are started into a true economic recovery then we should expect government intervention to pull back and interest rates to begin their long trend up. This is likely to support the U dollar. If the recovery is not taking hold and 2010 continues to disappoint recent hopes, this too is likely to support the dollar. Interesting times…
Cory’s Chart Corner
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