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by Ashraf Laidi
Posted: Sep 25, 2008 14:01
Comments: 12
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This thread was started in response to the Article:

Fed Cut May Come Before Oct 29

The Swiss Franc outperform the yen as forex traders seek refuge to the least risky currency on soaring LIBOR rates, weak US data, GE earnings downgrade and rising odds of a Fed cut.
 
Ashraf Laidi
London, UK
Posts: 0
13 years ago
Sep 28, 2008 16:57
ajp,

The eventual passing of the US Treasury/Congress rescue package will surely trigger an initial rally in US stocks and reaccelerate carry trades at the expense of the yen. But the million dollar question is FOR HOW LONG? later this week , we'll get the ADP private jobs data (Wed), followed by the big US JOBS REPORT on Friday, which is expected to show a drop of at least 100K. There's also the ISM on Wed. Can we imagine the market reaction to this reports? Ive said many times and Ill say it again: THE RESCUE PACKAGE IS NOT AN ANTITODE TO THE SLUMPING ECONOMY. It ONLY relieves banks of their debt burden over the LONG TERM. So, any resuling yen decline from the rescue announcement is likely to be a good buying opprtunity.
ajp03002
United States
Posted Anonymously
13 years ago
Sep 28, 2008 7:40
except*
ajp03002
United States
Posted Anonymously
13 years ago
Sep 28, 2008 7:13
Hey ashraf,

I expect this bailout (whenever its passed) to have an inflationary,optimistic reaction in the equity markets, however, i don't know, expect for JPY, how high yielding currencies will react to this news. I would be a dollar bear, however, will the "carry traders" that unwound the last two months will try to reestablish themselves with more yen carry trades?
Ashraf Laidi
London, UK
Posts: 0
13 years ago
Sep 27, 2008 10:34
ajp, Yes, the coordinated liquidity injections by the Fed, ECB, BoE and SNB were a considerable form of policy easing. But the target the price of money must be addressed by lowering the benchmark target for overnight funds, rather than continuing to target the quantity of money with liquidity injections. Announcing a decline in the fed funds and discount target triggers a swift psychological boost in buyers and sellers of the flow of funds.

3 months ago, people used the same argument you make; rates are too low and any more rate cuts spur further inflation. people's (and the Fed's) priorities were way off. Ive warned all along that as the credit market stress turns to turmoil and a standstill in banking confidence, the already weak economy will take a deeper hit, in which case, DOWNSIDE RISKS WILL OVERWHELM UPWARD PRICE PRESSURES and there goes away inflation. And this is exactly what's happening. inflation is DOWN and economic contraction is HERE. The Fed must make a shock slashing of interest rates, rather than over $1trillion in liquidty injections since summer 2007.

And by the way, did you kno that in 2003, Fed cut rates to 1.00%. Things were nowhere as bad as now and now rates are 2.00%.

Hope this clarifies it.
ajp03002
United States
Posted Anonymously
13 years ago
Sep 26, 2008 23:17
The reciprocal currency arrangements with the European Central Bank, and the central banks of Switzerland, England, Canada, Japan, Australia, Denmark and Sweden now totals $290 billion. Who needs more easing? I believe interest rates cuts are too big of a psychological weapon to be used currently. Only if the bailout plans fail or carry trades unwind to extreme levels, maybe then.

Other notes: Is AUD/JPY forming an ascending triangle pattern on an uptrend move?
Ashraf Laidi
London, UK
Posts: 0
13 years ago
Sep 26, 2008 19:11
Hi Ashraf,
Futures magazine can be found in most bookstores in the US, but not sure about Dublin. The shorter version of this can be found on this site in articles 2 weeks ago TITLE: "implications of gold rise relative to oil". There's more extensive analysis about this subject (gold vs oil) and the relationship between equities and commodities in my book in Chapters 6, 8 and 9. See Table of Contents in book section of this site.
Abid Ashraf
Dublin, Ireland
Posted Anonymously
13 years ago
Sep 26, 2008 18:50
Dear Ashraf,

Where can I access your Futures magaizne? Is this paid service?

Regards
Ashraf Laidi
London, UK
Posts: 0
13 years ago
Sep 26, 2008 15:47
Patrik,

It depends what commodities we're talking about. as i argued often in this site and in this month's Futures magazine, gold will OUTPERFORM oil, as a result of prolonged central bank easing from US and other nations. Oil may remain weak but not fall off a cliff. Copper will be supported by improved demand and prolonged supply problems in Peru and Chile. As for food and agriculture, world demand will continue as the global slowdown varies around the globe. Eurozone, UK and Asia may slow, but the latter is surviving on intraregion trade. Commodities' overall rally has yet another 5-6 years according to historical cycles.
Patrik
New York, United States
Posted Anonymously
13 years ago
Sep 26, 2008 15:40
dear Ashraf, do you agree with the analysis that predicts that in the next few years the slowdown in worldwide economic activity will lower demand for raw materials, therefore decreasing prices of commodities that would subsequently lower the value of commodity currencies?
thanks

Nick E.
Posted Anonymously
13 years ago
Sep 26, 2008 9:58
Strong Website. Thank you for your contribution to the Industry...