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The Strange BRIC Story

Chuck Butler (June 26, 2009)

Friday, June 26, 2009

And Its Damaging Effect on the Dollar

Also In Today’s Letter…

By Chuck Butler What a volatile week for currencies! Up, down, all around, and settling back to levels that we saw before the Fed’s FOMC meeting earlier this week.

Suddenly, investors are looking for yield again… In fact, looks like they’re desperately seeking yield. And why not? The Fed and the Bank of Canada (BOC) have come out and said that there will be no interest rate hikes until we’ve turned quite a few pages on the 2010 calendar.

So, with investors clamoring for yield, the dollar is getting taken to the woodshed! As I said earlier this week, once the euro probed above 1.40, the single unit would need to take hold of the figure and build on it. Otherwise we’re doomed to remain in the 1.35-1.40 range and range trade indefinitely.

Range trading is for the birds! Talk about counting flowers on the wall, and watching paint dry! Ugh!

What You NEED To Know About the SDR

I was shocked yesterday to see only a few readers asked to know more about the Obama SDR story…

Men, women, boys and girls, all…This is important stuff! Don’t take it lightly! There’s a movement underway that could end up costing you dearly, if you do not take the steps toward diversification!

I think it is important to know that the BRIC countries (Brazil, Russia, India, and China) are serious about replacing the dollar with a new “global currency” i.e., the IMF’s SDR’s.

It’s also important to note that the BRIC’s want more power on the world stage. And why not? These countries currently have almost $3 Trillion in foreign reserves. They also have a very large piece of the world’s population.

OH! And guess who was banging the drum for a “super-sovereign” currency overnight? China, that’s who!

It was the People’s Bank of China (the Central Bank) that first called for a new world reserve currency. They were the ones who called for the IMF to manage part of member’s foreign exchange reserves.

Hmmm… Okay, I just said that China wants more power on the world stage, and here they are saying that their puppet will be the IMF! That’s huge folks!

Brazilian Real Is On a 3-Day Tear

Back to what’s going on in the currencies today. The dollar is getting taken to the woodshed today! And the currency leading the pack against the dollar? (Drum roll please…) The Brazilian real!

The real is on a three-day winning streak folks! In fact, the real has climbed back to levels it saw before the Brazilian Central Bank (BCB) cut rates about 10 days ago.

The way I see it, it’s interesting that investors are buying up the BRIC countries right now. It really says something about where we’re headed as a world.

Having said that though… You must know about the volatility in exotic currencies. Look at what happened this week. On Monday, we started the week with the real at 1.9750, only to see it rocket to 2.0326 in one day’s trading, a near 3% move / loss in one day!

Then we saw it rally back to 1.9795 the next day, and after three days of gains the real sits at 1.9420 this morning, thus generating a “gain” for the week!

That’s it for today… Today marks the two-year anniversary of my surgery that removed my ancer-ridden femur, and replaced it with a prosthetic. Quite an ordeal, but here I am! I’m so happy that’s behind me now! Well Michael Jackson has died at 50 years old. When I think of Michael Jackson, I just remember my two oldest kids, playing that Thriller album over and over again. The currencies are having a Fantastico Friday, so why don’t we joining them?

That’s it for today…
Chuck Butler

EDITOR’S NOTE: On Monday, our colleague Ashish put out the call to buy the Brazilian real three days before it started rallying! It’s now a bit too late to jump on this trade, but you can get in on his next big winner here.