US dollar index falls below 80

Fears of a global credit squeeze and worries about U.S. economic strength swept across financial markets on Monday [6 Aug 2007], shaking up stocks, knocking the dollar to a 15-year low and straining popular currency trades.

Risk aversion, meanwhile, threatened the "carry" trade in which investors have borrowed in low-yielding currencies such as the yen to invest in assets in higher-yielding ones. The yen rose. The dollar was down a third of a percent at 117.66 yen. High-yielders such as the New Zealand and Australian dollars were weakening against the yen.

The dollar fell to a 15-year low against a basket of currencies, as speculation about the credit market and softening U.S. data prompted thoughts of a U.S. interest rate cut. The dollar index fell below the psychologically key 80.0 level, while the euro rose to within sight of its record high above $1.3850 struck two weeks ago.

- Something that a lot of people have been watching for : the USDX falling below 80, crashing through a multi-year support level from which it had repeatedly bounced off earlier. But apparently not this time. Watch out below !!!

(2007-08-06 17:09:58 SGT) [Biz] Permalink

How far the fall?

In recent days, I have been telling all and sundry that I am expecting the following headline, or a variant thereof, to be splashed across newspapers : "All Stock Gains for 2007 Wiped Out". I know we are close, but how close are we? How far do shares have to fall across the various markets in order to wipe out all 2007 gains? Here's a Google spreadsheet that tells you how far :

As you can see, going by this criteria, Japan's Nikkei index has already been wiped out for this year. The US S&P500 has just 34.32 points, or 2.42% to go. Dow Jones has got a little bit further, 707.39 points or 5.67%. Australia's ASX is roughly in the same league. Fellow contrarian shooperman predicts that Singapore's STI will take out 3000 on the downside. That will include wiping out all 2007 gains too. Just another 2 or 3 days of 100 point drops would do it. Shanghai's SSE is going strong, though. People are either throwing money at the market, or their government is printing money like crazy and throwing it at the market. Could be both.

You know what they say - you need to know where you are before you know where you are going. So here we are. Meanwhile, I'm setting aside cash. And waiting for that headline. And getting ready to play contrarian.

(2007-08-06 12:54:18 SGT) [Biz] Permalink Comments [1]

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