Pure physics.... heat the air under something enough and it eventually goes up ...

US investors deleveraging international stock, other investors going for safe US treasury bonds, a few other reasons.... when sh!t hits the fan people run for the american dollar which is rather ironic since the global problems mostly reside in america's financial and economical system.

Rest assured it wont stay up long, not with a half percentage point interest rate and the amount of money that the fed reserve is printing to reinflate the economy.. the us dollar can go down as fast as it went up and possibly will do just that.

was only back in feb march and april that the aussie was around 95 cents to the US , gold was over 1000 US an ounce and currency analyst where saying the aussie could hit parity


You looking at going for a holiday or buying something over there?

How many US dollars are there in the world?

I'm not so sure it was the US dollar that went up, rather that the Aussie dollar fell. We rely on exports for our economy to prosper and now that raw commidities (sic) have fallen greatly then the aussie dollar is not worth as much and our economy stalls.
I think that is part of the reason anyway. It's evidenced at least by the fact we haven't dropped at all against the Pound or the Euro.

sick_em_rex said...
It's evidenced at least by the fact we haven't dropped at all against the Pound or the Euro.

Everything stayed same relative, except $US. Thus my question. I know there are a lot of richies in US, but there are also a lot in Euroland, Asia and everywhere in between.

kk said...
Remember for everyone who lost money (real money not on paper) someone else made money..

I've never got this statement. If I buy a horse for $100, found out it had AIDS and then sold it for $50, who made money?

Anyway, I'm jsut surprised it went up that much, considering their situation.
Over and out.

this is some extracts from a larger Fat Profits article at the end Oct on the $US and other currencies. The $US has appreciated significantly against all international curriences, but is now retreating since this was posted.


Over recent weeks, extreme currency movements have been the main theme of
financial markets. The currencies of the world’s two largest economies, the US
dollar and the Japanese Yen, have been beacons of light. In just the last three
months or so, every other major currency has declined sharply against the dollar
and the yen.

‘Deleveraging’ is the simple answer to why these two currencies are displaying
unparalleled strength. However, we need to go much further back to really
understand these recent violent currency moves
Clearly, liquidity around the globe is rushing back to the source, and sucking
the life out of financial markets in the process. From an economic perspective,
we can rationalise these moves on a short term basis but longer term, there does
not appear to be any justification to support US dollar strength.

What has caused this huge rally in the face of negative real interest rates and
an economy in recession – traditionally reasons to SELL a currency, not to buy?
The short term view is a matter of radically altered supply and demand dynamics.
When the credit bubble was expanding, a hedge fund with, say US$1 billion of
equity may have borrowed US$30 billion from a range of banks. This provided the
investor with a US$31 billion investment war chest.
While much of these leveraged investments went into USD denominated mortgage
backed CDOs, a huge amount of leveraged funds went into emerging markets,
commodities etc. To affect this, the US dollar was sold and foreign currencies
purchased. Use of such leverage was effectively a huge increase in the supply of
dollars, without a corresponding increase in demand.
In addition, strong US consumption in recent years has also been a source of US
dollar liquidity (supply). The US household sector borrowed heavily against
appreciating house prices to artificially boost consumption. This led to a rise
in imports, or put another way, an increase in the supply of US dollars that
were then sold to buy imported goods.
These two dollar liquidity dynamics are now unwinding at a rapid pace. But of
the two, we believe the former is the primary driver of recent US dollar
strength.

In summary, we are seeing major upheavals in the currency markets as a result of
an unbalanced global economic system. The strength of the US dollar is
signalling deflation, loud and clear. But we do not believe this will persist.
After all, the process has only been in play for about three months.
The Fed has an unlimited balance sheet with which to fight the forces of
deflation. They are losing the battle at the moment, without doubt, but have not
yet lost the war. On this topic, we will provide an update on the Fed and
Treasury’s efforts to unlock the credit market at the end of the week.
Looking at the performance of the Aussie dollar in recent months has been
disheartening. The Aussie has been the weakest of all major currencies against
both the yen and the dollar. The charts below show the dramatic falls and firmly
place the Aussie back into ‘battler’ status. Most observers attribute this to
our reliance on commodities. While this is certainly a factor, we believe
Australia’s high debt levels are also playing a part.

These guys have a very good commentary on world outlooks on thier site if you are thinking of signing up. They have been predicting some serious issues with the US for some time. They also picked the start of the gold rally some years ago, and are predicting huge increases in the gold price in the years to come. Gold has returned a 30% increase this year in the face of all this crisis. (I have to give them a plug because I am not supposed to post this sort of stuff from thier paid site)

Yeah I'm baffled too. I vaguely remember that ~99% of foreign exchange transactions are by arbitrageurs (ie, speculators) rather than people buying real things.

When the Reserve Bank of Oz cut interest rates a few months ago, that got the currency speculators telling the AUD to bugger off. When the USA cut interest rates though, the AUD didn't bounce back up. Stoopid international markets...

Maybe falling demand for stuff-you-dig-up, and scaredy cats bringing their money home had an effect, but personally I blame the weakening of the Australian cricket team.

surfinchick said...

evlPanda said...
I've never got this statement. If I buy a horse for $100, found out it had AIDS and then sold it for $50, who made money?

The guy who bought the horse...It's no good for breedin' but ok for eatin'....he sells the 300kg animal to the glue factory for dog food (or to the local chinese takeaway) for $0.50 a kg and tripples his money.

Mmm, tatar style:




Thanks guys. Has answered my question, especially the quote from FP.