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Dollar Reacts Negatively to Chinese Criticism

gold-dollar-oil

Well, you weren’t the only one who read that story from the UK Telegraph yesterday (see my blog post from yesterday) – it seems that most traders read it too.

Today, the dollar tanked. Look at the green bars on the chart above and you can see that traders sold dollars in a big way, and pushed oil up VERY BIG today and gold moved ever closer to closing above $1000 (note that early today it was up above $1000 but ended the day up just $1.00.

Get used to this scenario. The UN is talking about a new currency for international trade, the BRIC countries want a basket of currencies to replace the dollar, and OPEC wants oil traded in Euros. Ugly.

How will this impact the investment markets? Commodity stocks will thrive in this scenario, much like you see today. Companies with big foreign sales (3M, McDonalds, IBM, etc.) will see earnings enhanced. Consumer companies will be under pressure. Many more as yet unknown relationships will become apparent, some providing opportunities for profit, some for loss. We will see.

Ultimately, it will mean more inflation, lower bond prices, and higher commodity prices.

Manage your portfolios accordingly or call us for assistance.

Mark