The Dollar On The Edge

Published on: December 21st, 2017

Raoul updates us on his US Dollar position and the scary developments in US Dollar offshore funding markets, which may well set up a great macro opportunity…


  • RP
    Roberto P.
    21 December 2017 @ 13:58
    Raoul, a couples of comment about your view on the USD: 1-I agree with David Zervos theory about the cycle of capital concentration and capital dispersion on US. My belief is that we saw 7 years of huge capital concentration in US peaking around 2015. Right now I believe we are on the capital dispersion phase. Almost every major asset is outperforming the USD, including the JPY wich tend to underperform in a risk on environment. I believethat capital concentration - dispersion rules over FED cycles. 2-We are seeing synchronized global growth. Bad for USD. 3- FED long term expectation growth didn't move because of the tax plan. However debt to gdp goes higher. Tax plan doesn't pay itself. Bad for USD. 4- Rate diferential has lost influence in the currency market because of CB's intervention. Currency market is harder to manipulate, remember when Japan introduced negative rates and the JPY moved against the BoJ desire. Currency market is signaling that Euro and Japanese yield should be higher. How do you explain record high German PMI and 10 year bund at 40 basis point ? 5-Tax plan is more a tax deferral rather a tax cut. Tax cut would be if there is a cut in spending at the same time. You are just adding debt when debt level are already high. 6- EEM top holding are tech companies rather than commodities like in the past. USD strength maybe lest important for EEM right now. 7-After the crisis CB's has been quite aware about market dislocation. It is hard to believe that CB's will allow a disruption in funding market that can cause global pain. In tha last FED minute they were concern about high asset prices but at the same time they were concern that a steep fall in equities would hurt economic growth.
  • mr
    mayank r.
    23 December 2017 @ 05:50
    What about the fact that US NIIP has burgeoned from sub 4 trillion usd for the longest of times to almost 8 trillion usd in recent years.. shdnt that offset any such dollar flow now and prevent a big move up ?
  • V
    Vijaykumar .
    24 December 2017 @ 05:41
    Hi Raoul, excellent piece. I am thinking of rebalancing my portfolio. I am middle age. My question is: Since I am partly in gold and emerging mkt bonds and money mkt funds, would it be a good idea to take money out of emerging mkt bonds since dollar may be getting stronger. if I take money out of emerging mkt bonds where should I allocate it to, TIPS? or us bonds? Thanks will appreciate replay. keep up great work
  • RT
    Rune T.
    27 December 2017 @ 20:53
    Raoul, does Kiril's chart on page 16 of WILTW make you question your dollar thesis?
  • RI
    R I.
    28 December 2017 @ 17:10
    Seems the dollar is putting in a nice head and shoulders top, no?
    • RI
      R I.
      29 December 2017 @ 20:32
      Indeed, "the dollar on the edge" of an 8-handle...
    • DW
      Daniel W.
      29 December 2017 @ 16:05
      Yep, moving straight to multi-year lows. Feels Kind of hard to be a buyer here
  • gg
    gurdeep g.
    29 December 2017 @ 23:09
    Apart from Uranium (still early) it's been a tough year for MI, not many calls went right or they simply got stopped out. Nature of catching a trend early. Onwards and upwards hopefully for 2018
  • TH
    Thomas H.
    31 December 2017 @ 15:20
    Inflation will hurt the dollar. It seems like we are returning to the guns and butter spending during the great society and the Vietnam war. Any comments?
  • sB
    sylvain B.
    7 January 2018 @ 10:09
    USDEUR is currently correlated to interest rate curve slope and flows. Which are both supportive of EUR. Furthermore I think their view on repatriation effect is probably overstated as unlike 05 companies have no timeline to repatriate and cash already held in USD. As long as USD weak supportive of Asia/EM assets over EU markets
  • cb
    carter b.
    12 January 2018 @ 15:02
    Hi Raoul - in the September commentary for the USD trade, you stated a stop loss of $23.65 on UUP would be good out for downside. Is that read of the technicals still valid here for you now the we are retesting? Thanks
  • PG
    Paul G.
    19 January 2018 @ 01:18
    seems to fit well with Jeff Snider's Euro dollar short squeeze analogy and the longer term decline of the dollar