CHINA: 'The world does not have Money to buy more US Treasuries'... http://www.shanghaidaily.com/article/print.asp?id=423054
The dollar move in 2009 was a momentum play on the back of decreasing risk aversion, effectively the opposite of 2008 when risk aversion became very high and the dollar went up. The momentum play has been fed by all kind of investors, ranging from sophisticated to less sophisticated. For instance, CTAs have been short the dollar over the last 6 months and we're reaching the point where their models are switching to long. These guys will push the pendulum the other way. Check the COT reports and you will see some significant changes. This coincides with the loss of momentum in the short dollar trade and its reversion since early december. Purely in terms of fundamentals, the dollar is undervalued on a relative basis. On the other hand, the euro and the yen are way overvalued. When it is advantageous to take a flight from Europe to do your shopping in the States, you know the dollar is cheap on a relative basis. On the back of this, one may feel Europe and Asia are stronger economies, with less leverage,... I would suggest people look twice at the health of these apparently healthier places. Europe is a mess both from a growth point and acknowledged leverage (there is so much people don't know about Europe). Asia is no better place. People think China is very strong, that it is going to debunk the USA and destroy the dollar. Well, China is a castle of card, it is Dubai^10000. I suggest people take a trip to China to study the place and better understand it. The level of indebtdness is unbelievable and is used to fund projects with negative ROI, way worse than what is occurring in the States. To people annoucing the end of the dollar, I just say the day of reckoning is indeed getting closer but it may not turn out to be what you expect. Yes, there is a lot of media frenzy in trying to bring down the dollar because the dollar is America, so lots of people also trade with their feelings. I am neither pro or anti American. I'm trying to keep my head clear and stay away from noise. I trade what I see. What I see is a dollar rebounding. Once the rebound has exhausted, I will reconsider my position. I don't see any reason to be short the dollar at this stage as not only, short and medium term models have sent long signals, but the longer term models are also turning long dollars. As they say, trade what you see, not what you think, expect or believe.
that had no bearing on my comment, obviously. Just eyeballing the first couple of charts in the article, made it clear there was a very short term runup in China activity, and then it dropped back down to where it was a couple of years ago, all in the midst of a major financial and economic malaise. It was a poorly researched and shallow article.