Why did the dollar go up today?

Discussion in 'Forex' started by cunparis, Sep 15, 2008.

  1. Can anyone explain why the dollar went back up after going down? I first noticed it down 0.64% and then it went down to -1% and then positive and now it's basically at 0.

    Meanwhile the British Pound & Euro both went down. Yet the Yen went up.

    Can someone please explain the dollar's movement? I expected it to go down and stay down. I don't understand why it bounced back up to 0%.

  2. Damn, EURO buyers got killed overnight
  3. It didnt!

    All the euro/yen and stg/yen carry trades got tanked. Hence dollar rallied against euro and stg but tanked against yen
  4. Can you explain this better?

    I was watching the currency futures this morning and the DX (Dollar Index) went from -0.6 to -1 to 0 and now it's -0.19%.

    The euro went form +0.6 to -0.1 and now it's crossing zero.

    it doesn't make sense to me.
  5. whats to explain. its unsuprising if dollar ralies, everyone was expecting another fed bailout with tax money and it didnt come so this is bullish for the $
  6. But people were already saying the dollar's rally was unsustainable. And now more financial giants are collapsing without a bailout. It doesn't sound bullish to me.
  7. NEW YORK, Sept 15 (Reuters) - The U.S. dollar rose on Monday as mounting risk aversion after Lehman Brothers Holdings Inc filed for bankruptcy protection sparked some safe-haven flows, while the yen rallied broadly.

    Analysts said the greenback, which had dropped in overnight trade, was also being buoyed by a sharp drop in crude oil prices to a seven-month low below $100 per barrel and fears that the U.S. banking problems would spread to other parts of the world.

    "The dollar has increasingly been seen as a safe-haven currency and it's exhibiting much of the same type of price action that it exhibited before last August's liquidity crisis set in," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York.

    "We are seeing cash temporarily moving into the U.S. dollar amid heightened uncertainty and market turmoil, despite the fact that much of the turmoil is centered here in the U.S. financial markets."

    Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection, after trying to finance too many risky assets with too little capital, making it the largest and highest-profile casualty of the global credit crisis

    At the same time, the market was also digesting news that Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) had agreed to buy Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and the Federal Reserve would accept stocks in exchange for cash loans for the first time.

    In New York morning trade, the ICE Futures dollar index was last up 0.6 percent at 78.800 .DXY. The index, which measures the dollar's performance against a basket of currencies rose as high as 79.360 at one point.

    The euro <EUR=> slipped 0.2 percent to $1.4197, erasing early gains which had pushed to $1.4479. Rising risk aversion pushed the dollar down 1.9 percent against the Japanese currency to 105.83 yen <JPY=>, the biggest one-day fall since early 2007, while the euro <EURJPY=> dropped 1.9 percent to 150.40 yen.

    Seen also as a safe-haven, the Swiss franc rose against the dollar, which fell 0.8 percent to 1.1203 francs <CHF=>.

    "It's all about risk aversion with the yen outperforming ... not surprisingly, the high yielders are leading the declines," said Dustin Reid, foreign exchange strategist at ABN Amro Bank in Chicago.

    The high-yielding Australian and New Zealand currencies fell sharply versus both the U.S. dollar and the Japanese yen. In Europe, stocks fell more than 4 percent and European credit spreads jumped wider.

    U.S. stocks fell sharply in early trade.

    The uncertainty was so high that major central banks around the world including the European Central Bank, Bank of England and Bank of Japan said they stood ready to help soothe markets.

    There is also speculation that the Fed, which holds its regular policy meeting on Tuesday, may cut interest rates again. Rate sensitive Fed funds futures are pricing in an 64 percent chance of rates falling to 1.75 percent from 2.0 percent at the September meeting. FEDWATCH (Editing by Tom Hals)
  8. This is interesting. I can see people selling stocks and putting money in cash (dollars). But for the dollar to rise, wouldn't people have to sell other currencies to get dollars? I'm not sure exactly how that works behind the scenes.

    If someone can recommend a book about this sort of thing I'd love to read it. I'm fascinated by how all this works.

    I quoted the last part because I don't understand how the futures determine the odds of a rate cut. Can someone explain that one?

    And finally, if there is a rate cut, does that mean the dollar will go down? Why?

    Thanks a lot for posting that article. I was reading CNBC and couldn't find an explanation.
  9. From what I've heard of forex all the explanations are bunk. 99% of forex trading volume is speculative and most of it is done by the big banks.

    Fundamentals might play a big role in the long haul but on a day-to-day basis it can look pretty random. My guess? Technical correction to fake out the inexperienced.
  10. 1) From the Reuters article...."It's all about risk aversion with the yen outperforming ... not surprisingly, the high yielders are leading the declines," said Dustin Reid, foreign exchange strategist at ABN Amro Bank in Chicago.
    The high-yielding Australian and New Zealand currencies fell sharply versus both the U.S. dollar and the Japanese yen."

    It's carry trades (see 4) being unwound, buying back the dollar by closing long Aud/Usd and Nzd/Usd trades for example.

    2) Me too, the markets are fascinating, but books on the subject seem to be either out of date and not relevant to the current market, too general, too specific, or just too vague. The financial news channels and websites are a good source of info about what moves the markets and why, I have Bloomberg TV on most of the trading day, they have some good interviews on there with plenty of conflicting opinions!

    3) Some complex calculation that I could never quite follow but you may understand it, there's a simplified version here.

    4) (Expectation of) rate hikes/cuts don't automatically mean anything (good or bad) for the dollar but a cut would reduce it's yield and so it may be better to hold high-yielders such as Aud and Nzd funded by low-yielders like Usd and Jpy (the carry trade).
    #10     Sep 15, 2008