Record-high U.S. budget deficit? Declining corporate earnings? Unemployment likely to rise through at least May? Don't mention those potential scenarios to the foreign exchange, as currency traders sent the dollar rocketing higher versus the euro early Monday, up 3 cents -- an enormous move in the currency market -- on the belief the Obama Administration's fiscal stimulus package will help the U.S. economy recover from the recession.
The dollar strengthened 3 cents to $1.3566 versus the euro and rose 1.64 yen to 93.50 versus Japan's yen. The dollar has rose 3 cents to $1.1097 versus the Swiss franc, and strengthened about one-half cent to $1.4494 versus the British pound.
Currency trader Andrew Resnick told BloggingStocks Monday trading desks are back at full strength after the holiday and they're clearly signaling that they expect the worst of the U.S. recession to be over by mid-year.
"It's a classic 'get ahead of the pack' strategy. Traders sense that Obama's fiscal stimulus package, if it's above $800 billion over two years, will increase demand, and that will begin the recovery process, which points toward more-attractive U.S. investments and a stronger dollar," Resnick said. He added that he was long with the dollar versus the euro and the Swiss franc.
The Obama Administration is expected to call for a $700-850 billion fiscal stimulus package later this month.
Resnick added that because the U.S. is 'later in the cycle' than the rest of the developed world, there's a belief the U.S. will pull out of its recession months before Europe and Asia does, which is also strengthening the dollar.
Forex / Economic Analysis: One day does not a trend make, but currency trader sentiment is not to be taken lightly. The rising dollar could be an omen regarding U.S. stocks, if the dollar rally continues. Stay tuned.
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Reader Comments (Page 1 of 1)
1-13-2009 @ 2:36AM
Joana L. said...
Everyone is thinking and will do anything just to save money. President-elect Barack Obama's proposed stimulus package would provide businesses with billions of dollars in refunds on taxes they paid several years ago. The Obama speech is sparking many talks about the new stimulus package and the payday loan reform going on in New Hampshire. Barack Obama gave his economic address today, and a few Republicans had something to say about the plan. Fortunately, everyone agrees that a stimulus package is what the American people need, and they need it fast. Too many people need a payday loan nowadays just to get by. Not surprisingly, though, House Minority Leader John Boehner and Senate Minority Leader Mitch McConnell agreed that the plan was too costly. Boehner declares that "we can't buy prosperity with more spending,'' and McConnell suggested that money given to states should be loans instead of grants. To read more about the new stimulus plan and what some thoughts are on the American Recovery and Reinvestment Plan, read this article at your payday loan source.