Dollar bounces back up...
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In This Issue..

* Dollar bounces back up...

* Paulson heads back to congress...

* BOJ cuts rates to below the US...

* China to continue increasing the value of the Renminbi...

And Now... Today's Pfennig!

Dollar bounces back up...

Good day... The currencies took a breather overnight as the dollar bounced back up. When we left last night, the Euro was still holding above $1.42, but the single unit dropped 3 cents overnight and is now hovering around the $1.39 level. This move back down was to be expected, and serves as an excellent opportunity for investors who were afraid they had missed out on getting back into the currency market.

I have searched the news wires this morning and can't find any good reasons for the dollar's turn around other than it had simply gone too far too fast. Mike Meyer and I were talking about this yesterday morning, as we were looking at the trading screens in amazement. The dollar's move down over the past two weeks was even faster than the move up earlier this year. Chuck had warned readers all during the dollar rally that the strength was only temporary, but the reversal was just too quick. This move back up is healthy for the markets, and will allow investors another opportunity to move back in.

The US jobless numbers were better than expected as they dropped to 554k from an adjusted 575k last week. The continuing claims also fell to 4,384,000 out of work. Leading indicators fell .4% during November, and Octobers number was revised to -.9%. So while all of these numbers could be spun as positive (not quite as bad as the last ones), they still reflect an economy which is continuing to falter.

Treasury Secretary Paulson will probably be heading back to Congress to claim the second half of his $700 billion bank rescue plan. I think he is probably hoping Congress is in a giving mood with the upcoming holidays and will go ahead and let loose of the additional funds. But Paulson may have some trouble securing the additional funds as lawmakers have warned the Bush administration it must come up with a new effort to aid homeowners and get aid directly to their constituents.

Paulson is also probably worried that congress may pull back some of the promised funds and earmark them for the new administration's stimulus package. So now we have the present and future administrations fighting over who is going to get to spend the taxpayers money, with Paulson doing his best to get it all spent before heading off into the sunset. Chuck spent a tough day as the eye doctor yesterday, but still sent me the following note:

"As reported by the Wall Street Journal...

"Obama's economic team is crafting a stimulus package to send to Congress of $675 billion to $775 billion over two years, according to transition officials. The transition team has conveyed the figures to Capitol Hill, where the package is likely to grow as it works its way through the House and Senate. Obama aides hope to keep the package below the trillion-dollar mark, as they fear being accused of adding too much to the country's long-term budget deficit."

I laugh! As if! As if $775 Billion "won't add too much to the country's long-term budget deficit"! I give up... I really do... The Gov't thinks we are all BUFFOONS! They really do, folks... They are taking us as village idiots, thinking that if they keep it below $1 Trillion, we "won't notice"! "

Not to be outdone by the US, the Bank of Japan cut its benchmark interest rate to .01 from .3%. The move puts Japanese target rates back below the new target for US fed funds. The Japanese central bank also said it will continue using 'quantitative measures' to inject capital into the financial markets. The yen is unchanged on the day, but we saw a pretty large amount of selling by our investors yesterday.

The Chinese Renminbi headed for a second weekly gain as Chinese officials signaled they won't pursue a weaker currency to help exporters. Many thought the slow and steady appreciation of the Renminbi had come to an end as Chinese officials let the Renminbi move lower during the first part of this month. China's trade surplus which widened to a record $40.1 billion in November, continues to support a stronger Renminbi. Consumer prices in China rose just 2.4% in November from a year earlier, the smallest increase in almost two years. The easing of inflation pressures will allow China to lower interest rates to make sure growth stays above their 8% target. All indications support a further slow and steady appreciation of Renminbi.

Currencies today 12/19/08: A$ .6819, kiwi .5745, C$ .8155, euro 1.3982, sterling 1.5036, Swiss .9049, ISK 176.5, rand 9.7813, krone 7.0467, SEK 7.7980, forint 189.78, zloty 2.9152, koruna 18.8295, yen 89.24, baht 34.49, sing 1.466, HKD 7.75, INR 46.255, China 6.8457, pesos 13.17, BRL 2.3927, dollar index 80.869, Oil $34.39, Silver $10.67, and Gold... $835.34

That's it for today... I had good news from the hand doctor yesterday, as he feels the fingers are healing well. We had some crazy weather here, as the snow and ice were replaced by rain overnight with temperatures moving back above 50 degrees. The warm weather will be replaced pretty quickly, as temps are supposed to fall back to sub freezing today. Last weekend to finish Christmas shopping!! My wife and daughter are heading out to pick up her big present a little early, as they are going to pick up a cute little latese puppy this afternoon. Hope everyone has a wonderful weekend and a fantastic Friday!!!

Chris Gaffney, CFA

Vice President

EverBank World Markets



Posted 12-19-2008 9:20 AM by Chuck Butler