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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (63709)	5/6/2003 7:14:22 PM
From: Real Man	Read Replies (1) \| Respond to of 94695

Fleck said today: Euro Plays Dollar-Slide Trombone: Away from stocks was where the interesting action could be found, both before and after the FOMC meeting. Fixed income was not doing much before the announcement. Afterward, it took off, with 10-year notes up about five-eighths of a point on the day. The dollar, though, was the real story. It was down about 0.5% against the yen and the euro when those same Fed comments hit the tape. Shortly thereafter, the euro took off like a scalded dog, finishing up over 1% on the day, in a clear acceleration of the recent trend. Precious-metal prices don't show much of a change, because they closed before the Fed announcement. However, precious-metal stocks took note of the accelerating weakness in the dollar, and wound up replacing their earlier losses with gains. As the Rap was being put to bed, gold was up about 0.5% in after-hours trading. Back to the dollar's weakness, I have had several emails from readers asking me why people don't seem to mind. The answer is that this is the way it always works. As I have written before, when our currency starts to decline, it is initially deemed to be a positive thing: better for profits, better for exports, etc. At some point, central-bank jawboning will commence and volatility will pick up, though at some point, this phase of the slide in the dollar will stop and we'll have a bounce. People will say, well that's over with and it's stabilized, or some variation on that theme. It's worth noting, however, that in the currency markets, once a trend begins, it tends to go on much longer and carry much further in whatever direction it's headed than you would think possible. Further, currency problems are a little bit unique in that they don't matter until they matter. Then, they are the only thing that matters, and there's nothing you can do about it. That's basically what happens, and then you have a crisis. A mini-version of this occurred in 1987, but that's the only time we've had any kind of a real currency problem since the Carter administration. (There was a problem brewing just before the first Gulf War, but that war and what came next solved it.)