Posted by: Tom Keene on September 29, 2010
ADXY INDEX GP Q ROLL: Here is a snapshot of ascendant Asia. Its ADXY (35% renminbi, 14% Korea, 10% Singapore…). Note the lessons learned in 1997 (the collapse of their currencies) and the present retest of 2008 strength.
USTRBROA INDEX GP Q ROLL: Here is the USD chart that matters. It’s the real, trade-weighted broad USD. It’s not as grim as other more media-frenzy charts but it is nevertheless sobering. The Plaza Accord spike and the 90s Rubin/Strong dollar spike give way to new dollar weakness.
Here is a Martin Feldstein piece that walks through the MUST of dollar weakness and why it is not to be feared and also this classic William Cline paper. If you want to play in the game or even participate in the chat, these are both must-read and must-understand.
I put the above two charts up because they capture the heart-of-the-matter. There are sideshows (and you never know which, and which sequence of sideshows will be regime change). Here are two drama queens of the moment.
USDBRL CRNCY GP Q ROLL: Brazil is not happy. The currency tanked (see the 2003 spike of real weakness) then it made a Lula of a recovery. The new strength is Swiss-like, but tends to the same movement as commodity breatheren like Australia. Brazil is not Australia, and as a developing nation is not happy.
WIRACHIN INDEX GPL Q ROLL: China is not happy. Here is a guesstimate of their FX reserves plotted semi-log so slope matters. It has eased off a bit, but at $2.45 trillion USD it gets your attention. We’re going to tell them what to do?