Sept. 2 (Bloomberg) — Federal Reserve Chairman
Ben S. Bernanke has gone from a dollar liability to an asset, sparking
a rally that even bears say shows few signs of ending.
While
the U.S. Dollar Index fell to a record low in March as the Fed cut
interest rates at the fastest pace in two decades, traders now
anticipate lower borrowing costs will help America recover from a
global economic slowdown before Asia or Europe. Investors bought four
times as many dollars in August as the average over the previous 12
months, according to Bank of New York Mellon, a custodian for more than
$23 trillion in assets.
Traders who a month ago doubted there
was anything Bernanke could do to keep the greenback from depreciating
in the face of a widening budget deficit, mounting credit market losses
and falling consumer confidence are embracing the currency. The 6.4
percent gain against the euro in August was the best monthly advance
since Europe’s common currency was introduced in 1999. Futures traders
are making the biggest bets on the dollar versus six major trading
partners since 2005.
"The dollar is cheap,” said Roddy
MacPherson, an Edinburgh-based fund manager at Scottish Widows
Investment Partnership Ltd., which manages about $165 billion. "The
U.S. has been quite preemptive in bringing rates down and that bodes
better for the U.S. relative to many other countries.”
The dollar
is cheap because the US has been more aggressive in bringing rates
down? Say what, Roddy? All things being equal, lower rates are bad for
a currency, because they offer less incentive for foreigners to hold
that currency. If this is what passes as “investing logic” these days,
we are in trouble. Or at least the Scottish Widows are (hard to make up
better material than that….).
I find it completely amazing that
articles are now being written that openly proclaim a Bernanke victory
over the dollar bears. That’s just so unbalanced. Equal credit
certainly belongs to the central banks of Japan and Europe.
