Posts by "macrosam"

Every sovereign does this perpetual rebalancing, which is really intervention, though some are clearly more concentrated and direct bouts (i.e. recent SNB). Think of sovereigns managing foreign reserves no differently than fund managers who track indicies.

As long as there is a large amount of outstanding USD denominated debt, as long as there are assets invoiced in USD regardless of who and where they are being transacted (i.e. crude oil), there will be a strong demand for USD because that is the only way to pay down that debt.

There are clear, evident reasons for EUR rise aside from short covering, which clearly occurred. EONIA has been floored by the gradual yet progressive removal of excess liquidity in the expiration of the 12 month repo and the presumably limited lifespan on the remaining 3 month and 1 week repos. This has set a floor on front end rates, supportive of the EUR. If you saw last week when China's growth of 10.3% was released, it was also accopmanied by the release of China's overall reserve holdings (as China does not provide the transparency to identify the % composition of these reserves). Foreign reserves grew by the smallest amount in years. Some of this has to do with lower exports (trade accounting is flawed, but for the sake of this argument let's go with this). Less exports results in less USD and EUR China is long. But another driver of the decline buried within the smaller net increase has clearly got to be due to the decline in the EUR. China's EUR reserves lost value, while USD increased. Couple this with possible greater US export revenues versus EUR revenues (again, don't have this transparency), any asset manager would engage is a rebalancing of reserves that required both the selling of USD to decrease exposure and the purchasing of EUR to increase the % of the reserve bucket. This had to occur regardless of trade concerns. And those trade concerns are more effectively addressed by focusing on increasin domestic demand and consumption, which China is explicitly focusing on as China is not foolish enough to ignore the fact that external consumption in the form of exports is a ship that has sailed. Why do you think China is going to relapse into stimulus, even at the risk of restarting the bubble-like real estate market via a revisitation of their Western expansion strategy (originated in 2000 and put on hold)? Have you not read the stories of labor unrest, mid-skill labor shortages resulting in increased wages?

I am shorting EUR here at $1.2867 all the way up to $1.2900 if it gets there. If $1.29 breaks, I will close.

I like both GBP and AUD vs the USD, but like the GBP more than AUD. Gillard is now coming under a bit of pressure. Her post-Rudd honeymoon did not last very long and I will wait to see the resolution of this before considering a longer term timeframe.

One thing of concern regarding the UK is Alan Budd's resignation, signaling some dissent in the Office of Budget Responsibility.

A net EUR16bn of excess liquidity was drained, should be supportive of front-end rates, help EUR