Posts by "frog"

@nathan : not a bad idea. low probability it breaks either way.

Oil is up - in excess of 77$ yesterday - maybe smart money is selling dollar and buying oil. As long as the BP story is not ended, everybody fears a complete ban of offshore drilling which would put a pressure in oil price. Jim Rogers, who's been short euro early , is now long euro and long oil (with target above 100$).

So maybe it's not only a risk appetite but rather a dollar weakness related to oil (but remember what happened to oil and dollar after the Olympic games in 2008)

I'm waiting for the end of the World Cup and expect the downtrend to resume. Too much people being busy to watch TV and excited about football-soccer. Let this frenzy fade mid July.

I agree with catnip, this is a huge bull trap driven by many facts.

First, I do think China is behind this. It's in China's interest to underpin euro, otherwise Yuan would go up (because yuan is tied to dollar). Plus, China is buying everything in Europe...

Two, as I said in other thread here, there's a world cup effect ! As we saw in summer 2008 with Olympic Games. At that time, euro hit 1.60$ and oil 144$ per barrel. Everybody out there and my mother said it was crazy and unsustainable (no need to belong to GS team to understand that). And we know what happened next in september and october 2008.

So, for now this market is technically driven. No matter what are the news. This thing is going up till july or maybe august . We'll see.

Then, the normal course of event will come due. We might see a big european bank collapsing or even a collapse in consumer spending (taxes and income revenues are to be paid in september in France, I don't know for the piigs)

I'm pretty sure also that Greece will post one of its worse touristic seasons. The greek GDP should
also reflect that pretty soon.

For now, the bank's overnight deposit at the BCE is still going up (almost 400 billions euros) and that reminds me - again - summer 2008, before Lehman.

1.21$ !

This market makes me sick. How high is it gonna go ? While Trichet is quietly saying that they are buying state-corrupt-bankrupt bonds, eurusd is going up ??
What kind of market is it ?? And why the Chines let that happen ? Are they buying euro in hope this sh.. is going to recover ? What a joke ! Meanwhile, french and italian unions are cooking up monsters strikes by september. The name of the game is "lie"... how long is this going to last ?

Chinese Exporters Ditch Wounded Euro for Dollars
CNBC

Chinese exporters who made a big push only a year ago to bill in euros are increasingly turning their backs on the wounded European currency and demanding dollars instead.

By contrast, Beijing last week said a report it was reviewing the euro portion in its mountain of foreign exchange reserves was groundless and it calmed markets by saying that Europe remained a key investment market.

But Chinese exporters and the local governments that oversee them are less confident. They are trying to keep a wider berth from the euro, at least for now.

Hangzhou Natutex Apparel, a producer of special fabric for outdoor use, ships nearly all of its 10 million yuan ($1.5 million) in annual exports to Europe.

Last year, when the European economy looked to be on solid footing, it settled 50 percent of sales in the euro.

It has cut that back to just 5 percent this year.

"The reason is obvious. You have to be alert about exchange rates in the foreign trade business," Yu Yueping, Natutex chairman, said. "It would be too bad if your hard-earned profits were eroded by exchange rate changes."

The euro has tumbled 17 percent against the yuan in 2010 as the Chinese currency has been locked in place against a strengthening dollar.

Short-Term Contracts

Local governments are also telling exporters to be cautious about settling trade in the European currency.

Trade officials in Jiangsu, a prosperous manufacturing province, told exporters to sign short-term contracts when dealing with European clients and to cut back on euro-based settlements, the Jiangsu Business News reported.

"Considering the euro's uncertain future, exports to European countries should be settled in yuan if possible. If the buyers do not agree on yuan settlement, then use the dollar," it said.

More than 80 percent of total Chinese exports are paid for in dollars, according to local reports.

The government had been trying to change that, to encourage more euro settlement as part of a broader effort to diversify its foreign exchange reserves. It had seemed a smart - and easy - path to diversification.

Not only do euro bond markets offer the only real rival to the depth and liquidity of U.S. debt markets, but the European Union is China's biggest export destination, meaning lots of cash flows from Europe to China every year. Times have changed.

Shishi Daily, official newspaper of an export base in coastal Fujian province, reported cheerfully last week that its exporters were doing well after heeding warnings to shun the euro.

"Exporters in Shishi were told by officials via our newspaper: Don't use the euro, use yuan or the dollar! Many exporters accepted this suggestion, so even as the euro has kept falling, exporters in Shishi have not reported heavy losses," it said.

How to Make a Sausage

Peng Hu's sausage empire in northwestern China has been less successful.

His firm, Xinjiang Huarui Casing Products, every year exports about 50 million yuan worth of the material that encases sausage fillings to Europe, especially Germany and Austria.

With all his customers paying euros, he has suffered steep losses.

"I have tried hard to ask my clients to settle trade in other currencies, in dollars or yuan or whatever, just not euro," Peng said. "They have yet to agree, but I will keep trying."

About 4,000 kms (2,485 miles) away in his textile factory, Yu reflected on the vagaries of the foreign exchange market. The dollar would probably not remain his currency of choice forever.

"Life has to move on and the euro may go up again a couple of years from now," Yu said.