In Search of New Foreign Exchange Equilibriums

March 23, 2012

Whether the euro looks resilient or weak depends on what comparisons to historical levels are chosen.  Intuitively one expects this besieged money to be on the defensive.  The Euroland economy is experiencing a recession.  The debt crisis is at best in remission as attested by painfully high bond yield spreads with Germany.  The Greek problem […] More

Significant and Two-Sided Currency Market Risk

January 27, 2012

Since the start of the financial crisis in 2007, analysts have hedged forecasts of growth and inflation with the caveat that extraordinarily high uncertainty creates the potential for outcomes both well above or well below baseline predicted paths.  An analogous truth should hold for key currency pairs over the next month or two.  Investors late […] More

Euroland Needs Further Euro Depreciation

January 13, 2012

The euro area is in a recession that European Central Bank officials think and hope will prove much milder than the last one.  However, growth risks are skewed substantially to the downside, and all other parts of the world are enjoying positive growth.  It is natural in light of this contrast for the euro to […] More

T Minus Seven Days and Counting

December 2, 2011

The euro’s survival will top the agenda at the December 9 summit of EU leaders, but opinions vary widely on the terms and last possible timing for meeting that goal.  Investor want a quick resolution, and their patience is running thin.  Europe’s sovereign debt crisis has festered for two years, far too long already, and […] More

November in Figures

November 30, 2011

November had uncanny parallels to October.  Most of October had seen a rise in risk appetite and associated weakness in the dollar and strength in equities, and in most of November just the opposite had occurred.  Former Greek Prime Minister Papandreou’s proposal to submit the October 26 EU rescue package to a referendum caused that […] More

Thanksgiving Week 2011

November 18, 2011

Currency markets next week will be contending with the still unfolding euro debt crisis as well as the peculiarities of the U.S. Thanksgiving Holiday closure. During Europe’s crisis, which began its third year this month, conventional wisdom has felt that currency movement was only weakly related to national economic fundamentals and instead dominated by frequent […] More

Currencies Dancing to the Beat of News Headlines

November 11, 2011

Intra-day volatility continues to dwarf any sense of purposeful direction in the arena of foreign exchange.  News headlines related to the euro debt crisis are producing wild swings in equities as well.  The dollar at 16:00 GMT today was a mere 0.4% stronger against the euro than its closing value last week.  It had fluctuated […] More

Lessons from an Eventful Week

October 28, 2011

In the final week of October, Euroland leaders at least managed to agree on something, but the substance of the agreement left virtually all analysts still very concerned about the region.  A significantly stronger U.S. growth rate in 3Q than the first half was meanwhile confirmed.  Quantitative easing by the Bank of Japan was expanded, […] More

Risk Aversion Isn’t Over until It’s Over

October 7, 2011

Don’t be fooled by the latest respite from risk aversion.  Such will return and generally linger around for considerably longer.  More about that in a moment after some quick comments on specific currencies. The euro/dollar key relationship is currently trading very near the $1.3375 average level for the nearly eight years that Jean-Claude Trichet has […] More

A Vicious Circle of Debt Deleveraging and Recession

September 30, 2011

A dangerous storm is brewing, and at its core is reinforcing debt and weak growth that can be found in advanced economies.  Just over two years ago, these nations emerged from their worst business downturn since the 1930s.  From peak to trough, real GDP fell 9.9% in Japan, almost 7% in Great Britain, and marginally […] More