Reply #33: Daily Pfennig 5/1/07: Risk Aversion Disappears... [View All]

[mojavekid]

http://www.kitcocasey.com/displayArticle.php?id=1358

OK... The currency trading range was pretty limited yesterday, but the bias for a weaker dollar was quite evident as the euro traded up close to Friday's new record level vs. the dollar. The news yesterday morning regarding China raising their reserve requirement ratio has been swept under the rug as calmer heads came to their senses and realized they were being dolts... Or... Maybe they read the Pfennig and said... "That Chuck is right, we are dolts!"

Even the Commodity Currencies of Australia, New Zealand, and Canada all recovered lost ground from the overnight "dolt trading"... You know... Last week, I told you that Reserve Bank of New Zealand (RBNZ) Gov. Bollard was the first central banker to complain about dollar weakness... I don't take his words lightly... They were sort of like a line in the sand... But as I said last week, instead of raising interest rates to make your currency more attractive (if you don't want it to be, like Bollard doesn't), put the clamps on Money Supply! But nooooooooo! This creation of Money Supply by central banks/treasuries is becoming like their "coke"... They need to go to a rehab center and withdraw from this awful habit!

OK... Euro & sterling strength has brought the naysayers out of the walls again... It's my feeling that both the European Central Bank (ECB) and the Bank of England (BOE) are going to be much more open to currency strength this time around than they were in 2004... Both need all the help they can get from a strong currency to fight inflation, because both are on the Money Supply "coke" too! Therefore, you've not heard a peep from either central bank regarding currency strength to this point... And it's my contention that we won't hear it, either...

Case in point is U.K. Manufacturing slowing last month... Yes, the strong sterling is to blame, but do you hear anyone at the BOE crying foul? No sirree...

more...