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-- Posted Wednesday, 24 December 2008 | Digg This Article | | Source: GoldSeek.com
There is a growing consensus in the foreign exchange markets that the dollar’s rally is over and that we are heading for a resumption of dollar weakness. But hold on before you place your bets. It seems pretty clear that what drove the dollar recovery was the stock market sell-offs of this autumn. Investors sold in foreign markets and bought treasuries. Investors sold in US markets and bought treasuries. This represented a liquidation of paper assets by those fearing a further market fall and hedge funds which had no choice. Dollar rallyEventually sellers were sold out and a few buyers returned for the ‘bargains’ and the dollar recovered, partly because many other currencies looked expensive given their own bankrupt economies. Now what is the immediate future in capital markets? Will hedge funds be net buyers or seller in the New Year? Now there is going to be a massive fresh liquidation of hedge funds on the back of year-end redemptions. The sensational $50 billion Madoff scandal will give added impetus to this sell-off. As as we found out - much to everybody’s surprise - in the past autumn a big sell-off is positive for the US dollar. So would it not be reasonable to suppose we are in for more of the same? Dollar fallThat is not to say that the monetary inflation now in the pipeline from stimulus packages, bailouts and quantitive easing will not eventually result in a run on the dollar, and a crash in the bond market. But this is still in the future, and in foreign exchange markets where billions change hands every second, that is an important consideration. Of course, I could be horribly wrong - like everybody who thought the dollar would continue to weaken this year. Trust the professionals if you like. Nobody is paying me to write this blog. If I could offer one piece of advice for 2009 that is to think for yourself and trust nobody. Treat my remarks skeptically too! However, personally I remain hedged with both dollar currency equivalents and a precious metal portfolio. This is a defensive liquid position and I can not see why you would hold anything else until markets have clearly established a new bottom.
-- Posted Wednesday, 24 December 2008 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Dollar Bears Could Be Surprised on the Upside
