STILL BULLISH ON THE DOLLAR NEAR TERM

(BIG DADDY’S UNSOLICITED VIEW ON THE USD AND THE US ECONOMY)

The recent filing of bankruptcy by the giant Lehman Brothers followed by the massive bail out efforts of insurer AIG by the U.S. government created quite a stir in the global financial markets. Yet, the perceived widespread financial meltdown as a result of these two major incidents was seemingly prevented from happening by the concerted and immediate defensive actions of several major central banks. What the central banks actually did is yet to be reported by the media. Coming at the heels of the long delayed moves by the U.S. government to solve the “bubble burst” problems of the mortgage industry, these two incidents were indeed dampers to U.S. efforts to revive the sagging U.S. economy.

However, I personally do not credit the central banks for the prevention of widespread financial meltdown from happening. I believe the Lehman and AIG incidents have long been anticipated by the markets and considered by many as a delayed reaction to the housing industry woes. These are incidents they knew were going to happen sooner or later. And though the breaking news was shocking for a while, many analysts believe much of it has already been factored into the current price of the slumping dollar. Many, including myself, look at the current situation as an opportunity to buy into the dollar near term (4 -6 months). The short and minor rally by the USD after U.S. finally announced its moves to solve the mortgage industry problems points to the possibility that it is “bottom picking” time for the USD.

While many will be sidelined by the uncertainties of the upcoming U.S. presidential elections with good reason, I still believe the dollar (and the U.S. economy) is poised to rebound after taking a long beating attributed to the “bubble burst” scenario. For one thing, the U.S. domestic market cannot get worst than where it is right now. With the coming Christmas season, domestic consumption is bound to improve, so it is with employment data which traditionally makes an upturn at about the same time every year. Also, any further slump in the USD will be met by the traditional demand for the U.S. currency by multi nationals looking to repatriate profits to their respective headquarters.