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Veteran Advisor

Dollar question

Zman, Nox, others are welcome to answer as well.  I have been reading some things on the dollar and am just wondering do you think we will continue to fall here?

I think the only thing that holds us up right now is the fact that we suck less than anybody else.

On the commodity front I think a weaker dollar helps grains but long term hurts the protiens what say you guys. JR

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3 Replies
Jim Meade / Iowa City
Senior Advisor

Re: Dollar question

"It appears that the impact of the value of the U.S. dollar on the value of corn may be less than implied by daily market commentary. The direct cause and effect relationship is relatively weak. There may be some recent economic relationship between the value of the U.S. dollar and crude oil prices which impacts the value of ethanol and therefore corn. The value of the U.S. dollar and commodity prices may also be correlated to some degree in the current economic environment as expectations about world economies influence both the value of the dollar and decisions about investment in commodities in general. In any case, it is unlikely that the corn market will completely ignore currency values in the price discovery process, even if the relationship is weak."


Darrell Good, U/ILL Ag Economist


Analysts have to explain markets with something, preferably something simplistic yet hard to disprove.  The value of the dollar has filled that role for some time.

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Re: Dollar question

I agree that if you "smooth" the dollar over time the relationship to corn is weak. Where it is very strong is on a short term basis where the in and outflows of the risk trade create big swings. That mostly changes ideal execution styles and makes it more likely to misinterpret large short term moves as significant.


Trend on the dollar is still up and we're in a correction which is reaching some levels of time and price that make it possible to be near completion. Nothing confirmed by any means.


Dollar strngth should accompany renewed equity weakness in the not too distant future.


Shoud see some reversal of the commodity plays but each individual commodity- while influenced to degree by that trend- can certainly follow a compelling story of its own.


Best, h



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Re: Dollar question

Well the top forex analyst sees the Euro going to 1.08 by the end of the year and may get to parity in 2011 (see link below).  I think the dollar index holds around 82.50 and then will move higher.  Most of the recent move has been from short covering in the Euro.  Euro futures have moved from below 1.19 to 1.27 today and open interest has been flat.  Not a signal of a new bull market but just taking its breath before the next move, which should be down.


I still feel that deflation or risk off trade will eventually dominate the markets.  Technical patterns point to the equity markets falling alot lower from here.


As far as grain markets go, I think you have to get some protection and put options look cheap to me.  Could sell some calls against them too.

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