The Gas Crunch Hits Home & When Boris Talks, You Listen ...
First, the gas crunch. Down the street, the local gas station was selling regular unleaded gasoline for $2.99 per gallon yesterday. Today -- $3.14.
Ouch!
Now, let's listen to my good friend Boris Schlossberg, one of the best currency analysts on Earth ...
"The dollar collapsed completely tonight in Asian and early European trade after Cheng Siwei, vice chairman of the National People's Congress stated that China should invest its nearly $1.5 Trillion of FX reserves in stronger currencies. The FX market instantly interpreted the remarks as a sign that the Chinese will begin diversifying their currency assets away from the greenback and as a result the dollar reached record lows against the euro, hitting 1.4705 in morning London trade. It fell materially against the pound as well taking out the 2.10 level."
Is there any hope Boris? Well, he adds ...
"Mr. Siwei has a history of making broad economic comments that often do not reflect actual policy, and ... the National People’s Congress is not involved in directly setting currency targets ..."
Well, that's good news, right? Uh, maybe not. Boris adds ...
"today's reaction speaks volumes about the extent of anti-dollar sentiment present in the FX market right now. The price action in the dollar is uniformly bearish, as currency traders fear that the problems in housing and finance sectors will drag the US economy into a recession in 2008, while the rest of the world will continue to expand and perhaps even tighten its monetary regimes."
Bottom line: US dollar going lower, gold going higher, oil going higher, commodities generally going higher. Because I'll tell you why China is doing this. It's not pressure from the do-nothing US government. Instead, it's the fact that China has to buy more and more raw materials for its infrastructure build-out, and that gets harder to do when your currency is hooked to the sinking US dollar.
Ouch!
Now, let's listen to my good friend Boris Schlossberg, one of the best currency analysts on Earth ...
"The dollar collapsed completely tonight in Asian and early European trade after Cheng Siwei, vice chairman of the National People's Congress stated that China should invest its nearly $1.5 Trillion of FX reserves in stronger currencies. The FX market instantly interpreted the remarks as a sign that the Chinese will begin diversifying their currency assets away from the greenback and as a result the dollar reached record lows against the euro, hitting 1.4705 in morning London trade. It fell materially against the pound as well taking out the 2.10 level."
Is there any hope Boris? Well, he adds ...
"Mr. Siwei has a history of making broad economic comments that often do not reflect actual policy, and ... the National People’s Congress is not involved in directly setting currency targets ..."
Well, that's good news, right? Uh, maybe not. Boris adds ...
"today's reaction speaks volumes about the extent of anti-dollar sentiment present in the FX market right now. The price action in the dollar is uniformly bearish, as currency traders fear that the problems in housing and finance sectors will drag the US economy into a recession in 2008, while the rest of the world will continue to expand and perhaps even tighten its monetary regimes."
Bottom line: US dollar going lower, gold going higher, oil going higher, commodities generally going higher. Because I'll tell you why China is doing this. It's not pressure from the do-nothing US government. Instead, it's the fact that China has to buy more and more raw materials for its infrastructure build-out, and that gets harder to do when your currency is hooked to the sinking US dollar.
Check out my new gold and energy blog at MoneyAndMarkets.com
posted by Sean Brodrick @ 7:59 AM
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