Dollar slide is crude
Thu, Sep 25 2008, 06:47 GMT
by Lloyds TSB Financial Markets Economic Research Team
Market overview
In last week's release the question was asked: is the US dollar bull trend over? The expectation was that we would see confirmation over the following weeks in the form of a broader decline, following in the tracks of the dollar yen. It may have seemed like a minor point that the dollar, during its bull phase, did not appreciate against the yen, but this was important to underlying structure of the market's positioning. In other words it showed the dollar was not in a primary bull trend and a reversal was at risk. Having seen the first phase of this decline unfold, a consolidation period is not unwarranted. However, the dollar should continue to weaken over the coming months with the previously weak commodity currencies gaining in momentum.
Volatility in all markets is at record levels and naturally a flexible approach has to be maintained, but the evidence of a floor in commodity prices continues to become more concrete, further fuelled by the weakness of core equities. This environment should further encourage flows into the swiss franc and yen, the ongoing core strategy, and underpin the moves in precious metals.
