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Archive for 15/09/2010
If the shoe drops
15/09/2010 by Philinje.
It seems there was a lot of chatter yesterday about the Fed implementing new stimulus by extending the recent limited QE (Quantitative Easing) and that may have cause the dollar to tank. It seems currency traders are very jittery about the dollar and if it can’t be viewed as a safe haven (in the face of an impending market correction overall), there was flight to the Euro and gold.
As the dollar/Yen approached 82, the Ministry of Finance in Japan pulled the trigger this morning, now that Kan has settled in as the Prime Minister, and instructed the Bank of Japan to intervene. That surprised traders who were eye-ing 80 or 79 and the Yen has tumbled today, for some spectacular gains in Euro, pound and dollar/Yen. This was the first intervention by BOJ since 2004, when it seemd like Japan was America’s helper in keeping the dollar afloat.
As for gold, it’s hanging in there and might have some more upside. But it’s time to keep stops close on any trading positions (again, not recommended). It’s hard to imagine the dollar has truly lost its lustre as a safe haven, and if the s**t hits the fan, we might see some strong upward movement in the dollar. Whether gold will go down strongly in that situation is another question. It seems to be functioning much more like a safe haven than let’s say in 08, but on the other hand it’s at all-time highs and the big banks have tons of short positions to unload still.
So that’s my take on the action yesterday and today. More soon.
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