Ditch The Dollar?
The dollar fell again on Thursday after suffering its biggest daily plunge since 1985. Should you ditch the dollar?
That downward whoosh stemmed from the move made by Federal Reserve which it said it would buy long-term Treasuries; some currency traders compare the move to effectively printing money.
In other words, the move stirred worries that the sharp expansion of the Fed's balance sheet -- which has already doubled in size in the past six months -- would spew dollars into global markets and lead to an oversupply of the world's main reserve currency.
The Fed’s announcement dampened the dollar's safe-haven appeal, knocking it down from a three-year peak hit against a basket of currencies earlier in the month.
Rebecca Patterson, head of global foreign exchange and commodities at JPMorgan Private Bank tells Fast Money she thinks that the current decline in the dollar is a psychological move more than it is a fundamental one.
“I’d be buying it back,” she tells us. “I think the dollar is oversold at this point particularly against the euro.”
In fact she recommends watching the 1.38 level for the EUR/USD, which she says is a point of technical resistance. If the dollar can break higher that would be a bullish sign.
And she says the relationship between the dollar and inflation has been positive -- that more often than not when we’ve had inflation the dollar has benefited.
If we have some inflation and growth alongside it -- and the US leads the global economy out of the recession, US assets will look attractive and capital will come to the US and that’s good for the dollar.
As you might imagine Jeff Macke has some thoughts on the issue too. Click here to read Jeff Macke's Dollar Daze and find out how he recommends trading!
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Trader disclosure: On Mar. 19th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AA), (BAC), (EEM), (FXI), (VIP), (TS); Seymour's Firm Owns (PBR); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Macke Owns (GE), (SDS), (MOS); Macke Is Short (BRK.b); Najarian Owns (C) Call Spread; Najarian Owns (GDX); Najarian Owns (GD) Call Spread; Najarian Owns (GLD) Put Spread; Najarian Owns (MS) & (MS) Calls; Najarian Owns (MSFT) & (MSFT) Calls; Najarian Owns (TGT) Call Spread; Najarian Owns (WFC) & (WFC) Puts; Najarian Owns (XHB) Call Spread; Najarian Owns (MCD) Calls