IMF said today that USD was still very overvalued. And not only that, they think its overvalued by 15%-35%. So what's your currency hedge strategy?
I've been a dollar bear for a long time, but this is getting a little old. I'm sure he's talking his book / best interest, however that works out. Am I the only one cheering the FOMC along thinking they may have played this rate cut -properly- ??? Assuming they don't cut rates anymore into this weak dollar environment, I think their decision is going to look very bullish for the US economy and dollar in the long run. Right now everyone is piling out of the dollar, into the gold and oil, etc. and things look nasty. But we know what happens when trades are one sided, in the end. Long term, the fundamentals are not good w/ entitlements, national debt, etc. I still agree. But other developed countries like Japan have it even worse (check percentage of GDP to national debt for example).
Wait a minute - I thought I was the only one cheering the FOMC for what they've done so far. Anyway, your last line about how other countries are in even crazier situations than the US, is why gold will rise against all currencies over the next 5 to 10 years, IMO. That's my long-term strategy.
There have been numerous academic and CB research efforts since the seminal Meese/Rogoff paper of 1983 to build a fundamental model of exchange rates movements and valuation. The majority have failed woefully (though PPP has 'worked' on a long-term basis in some) , so if the IMF has a model that can be relied upon, it should be a Nobel prize nominee. A while ago I looked back at what happened to FX moves after an IMF pronouncement, and the results showed no significant volatility. Ditto today. As the earlier poster commented, perhaps Rato is best faded.
Only problem with gold is besides jewelry its relatively useless. What happens when the the yuan strengthens, china's economy slows, and policymakers decide they don't have the desire to pursue gold as a reserve asset? At least you can turn oil into productivity. You can't do that with gold.. If investor psychology turns and jewelry demand backs off, gold will bust just like the rest. [not saying it won't get to 1000-1500oz] before that happens. What we need is a chinese recession to get commdities under control. The only way that happens is if we decide to end the cheap yuan permanently and go protectionist. Of course, we'll pay the price [literally]. I was looking at all the electronics I've bought the past few yrs -- literally everything is made in china. My wife's Macbook, my laptop, printers,etc .... I remember once upon a time made in Taiwan or Indonesia was common. Not as much anymore, it seems. OMG.. I just looked at HSI and china enterprise index. They just bought right thru our selling. Literally unstoppable.
Of course. The Communist Party's National Congress is now underway. No chance of a plunge in this period!
Does anyone actually think the IMF is a legitimate organization? It was created to keep the third world nations perpetually under deficit spending. As Argentina and the Thai have shown, doing exactly opposite of what the IMF suggests is the right thing to do. So it's probably a great time to start looking for a USD long position.
Actually, some asian countries (China, Japan, Taiwan..) are solving USD to decrease their holdings and it will affect to down USD more, right? I assume that they will change the balance ratio in their holdings to EUR and Sterling.