The dollar rose against the Yen for the first time in 5 days and the most in 2 months this morning.
Bernanke finally came out of his stupor and said the Fed is ready to tighten monetary policy once the economy improves. Once the economy improves? Hasn’t Ben been telling us how great everything is for the past 3 months??? The Dollar Index, which tracks the currency against six U.S. trading partners, recovered from a 14-month low after Bernanke signaled interest rates may rise when the economy “has improved sufficiently.” The yen dropped against all but three of the 16 most-traded currencies after Japan’s machinery orders gained less than forecast.
“People took the comments as an opportunity to take some money off the table before the weekend,” said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. “They came at an opportune time and allowed some people to get some profit out from bets against the dollar.”
White House economic adviser Lawrence Summers repeated the administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner. “He made it very clear that our commitment is to a strong dollar based on strong fundamentals,” Summers said at a Bloomberg forum in New York.
We’ve been talking dollars all week at PSW because it has been my opinion that there has been nothing supporting this rally, especially on the commodity side, other than dollar weakness and fears of further dollar weakness. It’s been a case of so far, so wrong though as our short plays have gotten hammered this week and I was thinking of opening this morning’s post by saying: "Hi, my name is Phil and I’m a shortaholic" because, try as I might, I have been unable to stop taking short positions all week. Even yesterday, as we tested (but did not break) our upside target levels, I found myself putting up 8 bearish trade ideas for Members (DIA puts, FSLR puts, GLD puts, USO puts, EDZ calls, TBT calls, TZA calls, SRS calls) and just one bullish play, which was a DIA vertical spread to cover, just in case we got burned by today’s open.
Fortunately, it doesn’t look like I’ll have to do a mea culpa this morning as FINALLY the dollar is finding some support at pretty much the exact same place we found support on 9/23, which was the beginning of our last…