The dollar is on the move again
Major currencies are on the move, big time, since yesterday. The yen has risen to 91 yen per dollar (from 97) today. The euro has fallen to nearly 1.25 dollars per euro (from 1.29). You get the picture.The G7 needs to slow down the disorderly run into the dollar. This run is in danger of snowballing into a panic – as people fear further dollar falls, they rush to buy more dollars (to cover debts in dollars and also to shift their portfolios), and so on.
Coordinated intervention, announced over the weekend most likely, will involve selling dollars, selling yen, buying euros and pounds. This can calm things, by showing there are no one way bets. (Will the Chinese be involved?)
Boy, I don’t know. I was kind of looking forward to $40 oil. It should be fun to see how Sarah Palin deals with this when she gets back to Alaska. A huge part of her economic success story up there is predicated on $130 oil. Those days are gone for now.
I heard Tom Friedman say that what brought down Communist Russia in the 80’s wasn’t Regan and the Cold War but instead oil prices. Oil went from $80 a barrell to $10 a barrell over a years span, and that just destroyed the Russian economy.
And I wonder if this current drop in oil is going to hurt our good buddies the Saudies and Iranians? My guess is yes.
That said, this market is so crazy. I have no clue what’s going to happen in the future. I’m just having fun watching the ride.