Jeff Macke’s Dollar Daze


The dollar fell again on Thursday after suffering its biggest daily plunge since 1985.

The downward whoosh stemmed from comments made by Federal Reserve earlier in the week in which the central bank said they would buy long-term Treasuries -- a move that should bring down mortgage rates and jumpstart home buying.

Why is that bad?

Some investors argue that buying up 30-year notes is akin to printing money. They say buying Treasuries means the Fed will increase the size of it's balance sheet even further -- a balance sheet which has already doubled in size in the past six months. That would spew dollars into global markets and lead to an oversupply of the world's main reserve currency.

“Welcome to crazy town,” says Jeff Macke on CNBC's Closing Bell. “Population you and me.”

Macke feels the Fed's latest move is such a game changer that it’s nearly impossible for investors to anticipate the ripples. For example, how does it impact Japan? “It’s a real problem for the Japanese who are trying to weaken the yen,” explains Macke.

It’s damaging for their exports, like cars made by Toyota or electronics from Sony .

And Macke thinks currency wars are not entirely out of the question. “I’m worried that we get into a currency fight – basically throwing our money at one another – just to boost exports!” because all the developed nations are in the same boat in terms of this financial crisis.

What's the trade?

In the meantime if you’re looking for a trade Macke recommends McDonald’s and Coke – companies with strong international sales. He thinks the Fed just signaled a strong willingness to devalue the dollar and as a result, “plays that worked in the environment of a weak dollar before should work again.”

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 anything else. (Click here to find out how she recommends trading it.)

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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 with wires