The dollar is rallying again today, and quite frankly, right now, the institutional momentum is so strong, that there's nothing that would stop this rally…today that is. It's a Jobs Jamboree Friday, the first of 12 for 2011, and as I said yesterday, I believe that the US will post the best monthly number for job creation in a couple of years today. I truly don't believe that it's something that can be maintained, given the fact that we're talking about December, when shops bump up their employment to deal with the Christmas shopping season. But, it will be the Big Kahuna today, job creation that is, and for that, we need to analyze what this will do to the currencies, right?
The Canadian dollar/loonie (CAD) seems to be the only currency with any intestinal fortitude to stand up to the dollar's rally this morning… The Swiss franc is holding on, but if you go back to last Thursday, the headline on the Pfennig was "Swiss francs and Copper reach all-time record highs"… And gold? OMG! The shiny metal has lost another $13 this morning! And silver is $3 lower than it was a week ago!
I would caution the markets from making too much of a credit rating cut for Japan… A currency dealer told me yesterday that 95% of Japanese Government Bonds (JGB's) were in the hands of domestic investors… So the Japanese hold 95% of their country's debt, and those domestic investors aren't going to give two hoots about a credit rating cut.
Don't you just love tidbits of info like that? Here you are, standing around at a cocktail party, and some guy says, "Hey! My inside information tells me that Japan is going to get a credit rating cut. That will sure knock the stuffing out of Japanese Government bonds." And you can say… "Ahhh… Not so fast there, cowboy… My guy tells me that 95% of Japanese Government Bonds are held by domestic investors, which will mean the credit rating cut won't mean a hill of beans to them"… And to think you get this cocktail information for free!
The Norwegian krone (NOK) is beginning to rally against the dollar as I write this morning… A quick look at their data cupboard, and I see where Norwegian Retail Sales for November showed a nice rise of 1.8%, and Industrial Production printed with a rise of 0.9%… Both of these results were far greater than the expectations, so, that's why the krone is feeling better about itself this morning, and mounting a mini-rally against the dollar.
A former colleague of mine, sent me a note last night, telling me that he had read a research report that called for investors to buy Singapore dollars (SGD) instead of Chinese renminbi… He asked me what I thought. I said… "That's exactly what we've told investors for over a year now… That Sing dollars are a great proxy for renminbi." I went further to say that I wish all our investors would opt for Sing dollars over renminbi, as long as renminbi remains a non-deliverable forward, which means it's non-deliverable, and its liquidity is tight! You can wire Sing dollars anywhere you want… So, for those of you who missed this discussion that we had about a dozen times in 2010, there you go!
So… I told you yesterday of Brazil's latest attempt to stem the real's (BRL) rise… Well, now Chile has decided to do the same. Now, the Chilean peso (CLP) is an ill-liquid currency, and you would have to be an institution, or Monty Millionaire to find an institution to make a market in it for you. I find it interesting to talk about, given the Chilean pesos' rise in 2010…and the fact that these developing markets have central banks that believe they can manipulate their currency, with limited resources.
To recap… The dollar continues to swing the hammer, even against the Chinese renminbi, and Japanese yen, two former stalwarts versus the dollar, rain or shine… It's a Jobs Jamboree Friday, which will show that job creation in December will have been the best in a couple of years… But is it December holiday employment only? We'll have to wait for the January numbers to know… There are rumors this morning that a credit ratings agency is going to downgrade Japan's credit rating because of their debt picture… Would this same credit ratings agency do the same in the US? And Chile is following Brazil into the currency manipulation ring.
US Dollar Entrenched in Rally Mode originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."