The Need for a Stronger Dollar

Jupiter, Fla., (PRWEB) June 15, 2008 -- In this issue of Money and Markets, Jack Crooks discusses the recent upturn in the dollar and two future scenarios. Mr. Crooks explains some reasons to remain hopeful that the dollar will continue to rise.

President Bush recently got his opinion in about the need for a stronger dollar. Granted, these comments have little clout since they mirror Treasury Secretary Hank Paulson's agenda for a stronger dollar, an agenda that has mostly been backed by empty words rather than substantive action.

Paulson, however, was just over in the Middle East doing his part in securing the current dollar pegs among Saudi Arabia, the United Arab Emirates and Qatar. The potential for de-pegging among these countries has been a talking point for dollar bears over the last year or two.

The Treasury Secretary is also warming up to the potential for dollar intervention. While actual intervention is a lot easier said than done, simply talking about it may suffice. Perhaps most important to the dollar's battle during the first two weeks of June is the surprisingly strong tone coming from Federal Reserve Chairman Ben Bernanke. Two weeks ago he sent the dollar soaring with inflation comments that aimed directly at the consequences of a weak dollar.

It's rare for a central banker to discuss foreign exchange rates at all. But Ben went as far as labeling a weak dollar as a major negative for the U.S. on June 10, Bernanke stated simply, that he and his fellow policy makers will "strongly resist" a surge in inflation expectations. With Bernanke's comments in mind, Crooks believes it's becoming increasingly clear where the Fed stands. Despite a struggling economy, and in the face of rapidly rising prices, it's a good bet that the Fed Funds rate won't be going lower than the current 2% any time soon. Stabilized interest rates would lend support to the dollar.

There are other reasons to remain hopeful.

First, the yields on 10-year Treasuries jumped to the highest level all year.

This is relevant to the dollar since rising Treasury yields suggest that investors are expecting inflation to remain a problem down the road. And that concern could inspire an eventual Fed Funds rate hike.

Second, the dollar is showing signs of life. In early June, after a solid rally to finish up the month of May, the dollar hit the deck hard. What's important to note is that those losses also marked a major failure after testing recent highs. Normally that's a sign of weakness and begets further losses. But the dollar didn't give in; instead, it bounced back more than erasing the disappointment of the two prior sessions. And then after a weak day of trading, the buck pushed to new highs.

According to Crooks one of two things could come from this:

"Scenario #1: The dollar breaks convincingly out of the current period of consolidation, igniting a fresh wave of dollar-positive sentiment that invigorates the bulls and leaves the bears worrying that a legitimate bottom is in. Scenario #2: The dollar declines, igniting a fresh wave of dollar-negative sentiment that reinvigorates the bears and leaves bulls fearing that a legitimate bottom is not in," Crooks states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1886

About Jack Crooks & Money And Markets     

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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