The Rising Dollar?

Posted by Bull Bear Trader | 4/27/2008 01:58:00 PM | , , , | 0 comments »

Barron's has an interesting article this weekend about whether the dollar is ready to rally - something that has recently been discussed quiet often in various television and print media outlets. Of interest from the article:

"In an April survey conducted by Merrill Lynch, 50% of global money managers said the greenback is undervalued, up from 30% three months ago, while a whopping 71% found the euro overvalued."

"Our own "Big Money" poll of nearly 120 money managers ... found most waiting for a massive unwinding of the recent short-dollar, long-commodity crush: Nearly three-quarters say they expect the dollar to rise against the euro over the next 12 months, while 66% see commodity prices falling in the next six months."

The article also mentions how reserve managers are unwilling to sell dollars at their current low levels, hinting that many feel we may be approaching a bottom, or at least at levels that they don't want to get caught selling at the low.

If the dollar does rally against the Euro and other currencies, investors can expect to see an effect on the price of oil and other commodities. Some estimates have 50% or more of the recent moves in oil, which is denominated in dollars, being currency driven. With any fall in crude oil, we may also expect to see some effect on metals/minerals and agriculture commodities. Agriculture commodities have inadvertently been linked to energy prices, along with the fertilizer companies which have benefited from their growth. Large multi-national industrial companies, which have benefited from selling cheaper products overseas, may also be impacted. Of course, there are always caveats. Regardless of currency moves, demand for both energy and commodities is still expected to stay strong. The large industrials, which will benefit from lower energy and commodity prices, will also see some tangential benefits that may help to offset currency moves.