Why Dollar Is More Attractive

A lot of cross currents today--on the negative side, we have AIG, the weakness in retail sales, the disappointing weekly jobless claims report.

On the positive side, we have 1) oil moving down midday which provided a modest boost to stocks, 2) the dollar rallying for the fifth straight day, largely on comments from the ECB's Trichet (he gave no indication that more rate hikes were coming), and 3) continuing outperformance from techs.

The good news for the U.S.--and the dollar--is that we do not need to cut interest rates, as they are already low. Other countries with heavy commodity-based currencies like New Zealand and Australia are likely to keep cutting rates; elsewhere the U.K. has not yet but probably will soon, and many are betting that even the ECB will be forced to cut rates soon. All this makes the dollar more attractive.

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