I’ve heard it so many times over the past months…”Don’t fight the trend…The dollar rally will continue”, “The dollar will continue to be a safe haven for some time to come”. Those comments are still valid today. The Dollar just keeps getting stronger and stronger. For a minute last week, I thought that trend was reversing. I mean how can you continue to justify the currency’s strength when there are so many problems with the US economy? The Yen was in a similar situation; its status as a haven is being
threatened terminated. The fundamentals don’t really provide support for it.
However, with the Dow dropping below 7000 yesterday, the Yen and the Dollar gained strength again. Once again the discussions have begun. Is anyone willing to make a call on whether this is a bottom for the stock markets? It should be close (but then again, people have been saying that for some time now).
In any case, I am bullish on the US Dollar right now. It certainly will keep its strength longer the Yen in the current climate. If the Equity markets start to rise, then investors will be willing to take their money out of safety. That might take some shine off the dollar. We will see what the rest of 2009 holds.