Forex

The deflation believers may disagree but I don't think commodities are exhibiting classic bubble behaviour yet. Some commodities are even off their highs of last year. Historically, the commodity cycle is a very long cycle, whether up or down. At $975, gold is a long way from its inflation-adjusted high of $2350 in 1980.

As an income investment, I can now buy 2-year bonds yielding 11% in Icelandic krona. Probably thanks to the U.S. credit crunch. I'm pleased with my investment last year in New Zealand bonds which are paying 9.5% income and have added a 10% currency gain versus the loonie. Iceland is much smaller than NZ but has nearly the highest GDP per capita in the world. I'm an investor and not really a speculator (except for gold)

I don't want to hedge the currency. Any outlook for the Icelandic krona? Does it tend to be correlated with any other currency or anything? (like the price of fish?)

Anyone notice Canada's current account balance went from being an almost $7 billion quarterly surplus to going in to a $500 million deficit in just two quarters ? $23.6 Billion surplus in 2006, $14.2 Billion surplus in 2007 and starting 2008 in the negative. That is what happens to the Canadian economy with a high dollar. If Canada isn't cheap...the world doesn't buy it's stuff, its services or visit the place. Yes we got a billion dollar increase in energy exports from higher ($US) prices, but that only makes up for the $1 billion we lost in auto sector exports. Then start subtracting the exports in goods, services, nickel, forestry and other sectors...and wow.
Fundamentals do not support prices of wheat, gold, oil and others. That doesn't mean they have to trade on fundamentals all the time...but eventually they will fall back to earth.

Commodities have always and will always go through boom/bust cycles. Anyone care to say "it's different this time" ?

That being said...I fully expect commodities to keep going up for a while. It's just that I have no idea how long a while is. Bubbles can last for years.

That being said...I fully expect commodities to keep going up for a while. It's just that I have no idea how long a while is. Bubbles can last for years.

On the other hand, there is no way that we could get away with an aggressive turn to policy easing without the Canadian dollar losing ground. It would effectively signal that the Canadian central bank is responding to a policy situation that could argued to be more dovish than the US: tame inflation; financial and credit market turbulence; and economic activity cooling (though not as broadly as in the US as yet).

RBA rate decision due in a few hours. Economists and markets are pricing in a 25 point hike to 7.25. I would tend to agree with this consensus, but I foresee the more probable risk to this scenario is that they actually take a hold and see approach for this month. From a policy standpoint, hiking so aggressively (consistent hikes) is dangerous giving the state of credit and financial markets. Growth will not be rising for long, and inflation will fall back when food and other commodity prices ease. Just a matter of time. They just need to determine whether they can sit through an uncomfortable period of high inflation.

wouldn't surprise me at all but I'd predict a quick bounce back down. I'm not going to trade it. How about if Chavez invades Columbia and USA steps in, or doesn't? Oil will go up farther and send the pair back down again. We know how well Bush and Chavez get along, serious Venezuelan threats at cutting off oil would impact this pair. I'm watching it closely.

If that happened, I would be more concerned with the dollar dropping due to the US's diminishing popularity around the globe.

From oil, a rise in prices wouldn't by secondary concern. My primary concern would be a dramatic increase in volatility which could in turn cause volatile price action throughout the commodities sector. Equities and credit markets would likely see more dramatic price action on its own as well.


This wouldn't have as great effect in USDCAD as it would in pairs like USDJPY, USDCHF and AUDUSD; but it certainly would lean on price action.

Well, 70 pips and the 50bps announcement, now it seems to have fallen back into the upwards trend it was in early this morning.

Thanks for the input on the Venezuelan issue, your perspective on the FX market is light years beyond mine.

Hi symonds my good friend ,what new news is about AUD in the market a few past hours ??

The quarter piont rate hike was a point for bulls, but the market saw that coming from quite a distance. What's more they gave a few dovish cues in the statement (mainly the remark that past rate hikes were substantial) that suggested they would be put on hold over the next few months at least.

On the other hand, we had a record current account deficit and retail sales that was unchanged, so consumer may be having trouble dealing with the cost of debt, gas and food.