Dated: 10th Sep'09 DOLLAR WEEKNESS, CONTINUATION OF THE RALLY IN EQUITIES
Dollar continues to be week; precious metals have been strong; what about the equities? Since its bottom during early Mar’09, the global equity markets have rebounded more than 50%. Will this strong recovery sustain? Or are the markets forming a bull trap for those who feel so? During the last few weeks, the only asset class which has shown strong rally has been precious metals especially Silver and Gold along with a continued weakness of the ‘Greenback’. DXY (Dollar Index) has declined 13% since 6th Mar'09 to 77 levels from 88.5 levels then. Technically markets were very much oversold during that period when they started to recover. Several experts posted comments like ‘start of the beer market rally’ for this move. But this beer market rally turned out to be a strong trending bull market where the equities have moved in one direction. Thanks to improved investor interest towards this asset class supported by better economic news globally. Now the markets are at a point where the investors are double minded whether the current trend will continue of a correction is in the making anytime soon? I was a no exception from this group and having similar thoughts. But the recent rally in precious metals which has been 'fast & furious' as the dollar continued its weakness during last few weeks is suggestive of the further rise in the equities. The dollar has declined around 16% against the Canadian Dollar, 13% against the Euro, 6% against the Yen and 15% against the Pound since 6th Mar’09. Against the INR the decline is close to 6.5% for the same period.
Source: Pacific Exchange Rate Service
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