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Race To Debase

Is the dollar about to get a whole lot stronger or is the current run just about done?

Dollar Vs. Euro

On Tuesday, for the third day in a row the dollar rallied against the euro as fresh signs of economic weakness in Europe suggested that central bank would need to slash interest rates further.

As you can see from this chart, the euro fell broadly, hitting a three-week low versus the greenback. "Markets do not believe the ECB can maintain interest rates above 2 percent for much longer," says Boris Schlossberg, director of currency research at GFT Forex.

However, the dollar's run might be done in the short-term, according to Dennis Gartman, author of The Gartman Letter. He tells us, “I don’t think the dollar will run a lot more versus the euro in the near future. It's already made substantial moves.”

Meanwhile, in Japan it’s a similar story. The dollar reached its highest level against the yen since December 1st. But, Gartman doesn't see a lot more upside here either. He tells us, "they will work to get the yen closer to par."

Race to Debase

Other Currencies

What about other currencies. Is the dollar making gains on those fronts, too?

The short answer is, “yes.” Last week Russia devalued its currency for the 12th time in seven weeks. Also Venezuela is expected to devalue its currency 30-40% in order to maintain domestic spending programs. And Vietnam recently devalued its currency by 3% on concerns of weak economic growth.

The Trade

So how should you trade these moves in world currencies?

“I think it all goes to the benefit of gold ,” replies Gartman. In other words, he recommends taking a long position though he also says he’s anything but a gold bug.

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Trader disclosure: On Jan 6, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns  (MSFT), (TM), (MOS), (WMT); Najarian Owns (CSCO), (ERTS), (MSFT), (GS), (XLB), (EEM); Najarian Owns Short Calls (MSFT); Najarian Own (NVDA) Long Sread ; Finerman's Firm Owns (MSFT), (EEM), (DNA); Finerman's Firm Is Short (IYR), (IWM), (MDY), (SPY), (USO), (IJR), (BBT), (GNK)

Jon Najarian Owns (VTIV), (BIIB)

Gartman Owns New Zealand Dollar
Gartman Owns Autralian Dollar
Gartmann Owns Canadian Dollar