US Dollar Condition

Dear Peter and ForexMentor family.

I have been following the story about the US Dollar for a while now, and I think we should all be concerned for the long term as far as I can see. The stories about the dollar are getting more and more noticeable everywhere, and they are now getting into the main stream media more and more. Jim Rogers (famous investor and author) was quite clear in an interview from Korea on Bloomberg.com. He basically says that what the US has been doing with the money supply is getting to a dangerous point (deficit and inflated dollar). You cannot thin the value of the dollar forever without grave consequences for the whole world and in particular for the US. Now there is also more and more open talk about recession. So far the official spinners have been able to maintain an outwardly polished image for the dollar by choosing what data to report and what not to report, but they will not be able to do this forever. The elections will be over for sure, the party will also be over soon! There are now more and more National Banks talking about putting their reserves into euro and yen. The latest have been Russia, Switzerland and there is also talk from Saudi Arabia and China. This is not good for the dollar.

Yen to Rise as Central Banks Buy Currency, ABN Says By Chris Young
Oct. 31 (Bloomberg) -- The yen will appreciate as central banks join the Swiss National Bank in raising their holdings of the currency to take advantage of its lower value and prospects for higher Japanese interest rates, said ABN Amro Holding NV.

The Swiss central bank is the latest to signal renewed interest in the yen as it trades near the weakest this year against the dollar and a record-low versus the Euro. Russia's central bank this month said it was considering lifting its holdings of yen, potentially reversing a trend that has seen the currency shrink as a proportion of central bank reserves.

Different Currencies
The United Arab Emirates, the second-largest Arab economy, may reduce its holdings of dollars by almost half in an effort to reduce its dependence on the weakening U.S. currency, the country's central bank governor said.

The bank wants to eventually lower the share of dollars in its foreign currency reserves to a range of between 50 percent and 90 percent, Sultan Nasser al-Suwaidi told reporters yesterday in Abu Dhabi. The U.A.E. official said 98 percent of foreign reserves holdings of about $25 billion are currently held in dollars.

The Canadian dollar may have a little hard time going very high given the coming meekness of the dollar and the ongoing value of commodities, which will likely appreciate in the long run. There is a lot of talk about the commodity topic. This issue will impact the Australian and the Canadian dollar in particular in the future.

Greetings from,

Christoph Lahrs
Albany, CA