ForexInfoCenter

09/23/2007 - USD bearishness hits fever pitch

Posted by FOREX.com's Weekly Strategy in September 21st 2007  
* USD bearishness hits fever pitch
* Risk assets/Carry trades are back in vogue
* Credit markets are on the mend, but not out of the woods
* Continuing to watch stocks as key gauge to risk seeking/aversion

The Fed surprised markets (and me) by delivering a larger than expected cut in benchmark interest rates, dropping the Fed Funds rate by 50 bps instead of the expected 25 bps. The result was as if a green light suddenly flashed on, signaling investors to resume risk-taking: equity markets surged, precious metals and commodities soared, and carry trades (long JPY-crosses, e.g. long EUR/JPY, AUD/JPY, and NZD/JPY) were put back on in a rush. Of course, the USD took a drubbing against all but the JPY, dropping sharply (1.5-2%) against European and commodity currencies by the end of the week. As of Friday afternoon, it's safe to say USD bearishness has hit a fever pitch, with front-page New York Times coverage and nearly every other media outlet running lead stories highlighting the dollar's weakness. Even the Loonie (CAD) made headlines, rising to parity against the USD for the first time since 1976.  Full text »

digg this! | del.icio.us | Technorati | Stumble It! Read More...

Filed under: Weekly Strategy