US dollar TRUMPED

"life is not about what you have, its about what you are doing today"

What a fine Sunday afternoon,

Wherever you are, I hope you are enjoying the chance to refresh.

In markets we have some interesting developments, not least of which Is Trump stating what has secretly been US dollar official behind closed doors policy for over a decade now. That is how long I have been pointing out the US “strong dollar policy” is actually the steady decline of the US dollar policy.

Previously the strong USD policy was stated in public, so as to avoid any kind of market dislocation, while nothing was done to actually support the currency, the allow a steady decline policy.

The US dollar has been the most inflated over-valued currency in the world for a very long time. This was the product of the decades ago world where there was the monolithic US economy, and then in a distant second the rest of the world. This is no longer the case.

The rest of the world has caught up.

My apology for saying it again but this is exactly why I was invited to speak in Russia at the APEC Summit in 2012, because of my thoughts on there becoming an equalisation of world power, diplomacy, economic and militarily. Much of this is beginning to be more widely accepted now and many people say, Yes, of course. In 2008 / 2009 no one was saying it, and when I spoke at APEC about the inevitable outcome of this being the coming of age of three equal reserve currencies, reflecting the new stature of Europe, China/Asia, and the USA, Putin actually referred in a speech to my having left the Rouble out. Oh well ! The thing is, what Trump has just said is only news to people who do not get this new dynamic global economy we live in.

Still, that is probably a lot of people, and our current currency positioning is likely to benefit from this development. Perhaps in a lasting way. It is quite possible that this will see the development of a lasting and significant down-trend in the value of the US dollar. Which is only the repositioning and equalisation of the US dollar with the Euro and the Yuan to levels that more accurately reflect our modern world. As dynamic and truly multi-pronged it is.

Don’t forget, the US has the world’s biggest trade deficit. So why the currency strength, when greater returns are also available in alternative major thriving economies. 

The US dollar fundamentally belongs at lower levels. This could be the catalyst that begins to move it in that direction.

We will continue buying the Euro, Sterling and Australian dollar.

Regards,

Clifford

www.cliffordbennett.com.au