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Morning Note: Dollar to Continue Deteriorating?

Catherine Holahan
Monday, 28 Feb 2011 | 11:58 AM ET

The relationship between dollar and the euro had the attention of the Fast Money Traders Monday morning as the euro set a new three-week high against the greenback.

“You got this deterioration in the dollar,” said Joe Terranova, Virtus’ Chief Market Strategist. “A lot of folks have said you have to buy the dollar here.”

The euro was rising on expectations that the European Central Bank will raise long-term rates before the end of the year in an effort to curb inflation – thus strengthening the shared currency. The Fed, meanwhile, is projected to continue QE2 to completion, non-withstanding last week’s hawkish comments by St. Louis Fed President James Bullard.

The European Central Bank will hold a policy meeting on Thursday to decide whether or not to raise the rate at which banks can borrow longer-term funds. Many investors expect the ECB could announce a rate hike after that meeting, or at least signal that it will raise rates by the fall.

But the markets’ expectations of a European rate hike could be thwarted by higher oil prices, cautioned Dennis Gartman, author of The Gartman Letter. Though “Europe has a greater propensity to tighten than we do,” Gartman said that increasing their rates would likely damage their economic recovery. “Higher oil makes rate hikes less likely,” he said.

If the ECB fails to take a hawkish tone, the dollar could rally from recent lows. It also could rebound against the Euro on increased concerns about Ireland. The EU is debating lowering the interest rate on Ireland’s emergency loans to help that country rebound. Though the Euro did not react negatively to the news today, it is possible that more bad news out of Ireland could again raise sovereign debt concerns.

A better trade than the dollar, however, is the “loonie,” says Gartman. Canada’s dollar is likely to Mid-East turmoil and higher oil prices make Canada’s oil sands more profitable. “Oil sands look better and better by the hour,” said Gartman.





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Trader disclosure: On Feb 28, 2011, 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 (AAPL); Seymour owns (BAC); Seymour owns (F); Seymour owns (FXI); Seymour owns (GE); Seymour owns (POT); Seymour's firm owns (TTM); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (MDY); Finerman's firm is short (XRT); Finerman's firm is short (IJR); Finerman's Firm Is Long S&P Puts; Finerman's Firm Is Long Russell 2000 Puts; Finerman's Firm And Finerman Own (AAPL); Finerman's Firm Owns (BAC) Leap, Finerman Owns (BAC); Finerman's Firm Owns (BBY); Finerman's Firm And Finerman Own (BP); Finerman owns (C); Finerman Owns (GOOG); Finerman's Firm And Finerman Own (HPQ); Finerman's Firm Owns (IBM); Finerman's Firm Owns (JPM), (JPM) Leap; Finerman Owns (JPM); Finerman's firm owns (M); Finerman's Firm And Finerman Own (MSFT); Finerman's firm owns (TGT); Finerman's Firm Owns (WMT); Terranova owns (VRTS); Terranova owns (C); Terranova owns (UPL); Terranova owns (ABT); Terranova owns (MS); Terranova owns (PBR); Terranova owns (BAX); Terranova owns (TEVA); Terranova owns (CVI); Terranova owns (RSX); Terranova owns (SU); Terranova owns (CNQ)

For Joe Terranova
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DPUKF)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (EBAY)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (ATW)
Accounts Managed By Kanundrum Capital Own (RDC)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Own (TLT)
Accounts Managed By Kanundrum Capital are long the Euro
Accounts Managed By Kanundrum Capital are long U.S. Bonds
Accounts Managed By Kanundrum Capital are long Copper
Accounts Managed By Kanundrum Capital Own (FCX)
Accounts Managed By Kanundrum Capital are long Corn
Accounts Managed By Kanundrum Capital are long soybeans
Accounts Managed By Kanundrum Capital are short the Australian Dollar
Accounts Managed By Kanundrum Capital are short the U.S. Dollar

For Dennis Gartman
Funds managed by Dennis Gartman are long Crude
Funds managed by Dennis Gartman are long Canadian Dollar, Australian Dollars, Gold, Wheat, Corn, Soybeans, Sugar, Crude, Nat Gas
Short: Euros, British Pound Sterling, Japanese Yen

For Christopher Verrone
Chris Verrone has no disclosures.

For Amelia Bourdeau
Bourdeau has no disclosures

For Brian Stutland
Stutland Equities is a market maker in VIX futures and options

For Dave Nadig
Nadig has no disclosures

Comcast Is The Parent Company Of CNBC
Comcast Is The Parent Company Of NBCUniversal
GE Owns 49% Of NBCUniversal
GE Owns 49% Of CNBC

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