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The Perfect Moment to Sell the Singapore Buck

Chuck Butler (April 14, 2009)

Issue #60: Tuesday, April 11, 2009

Also In Today’s Letter…

By Chuck Butler I’m feeling marginally better today, so I’ve got that going for me!

You should have seen the currency screens lighting up yesterday. Wow! There was a lot of pent up trading leftover from the thin holiday trading volume on Friday. But it was still impressive to see this type of trading yesterday – especially considering Easter Monday is a trading holiday in a few countries too.

The volume was good for currencies. That bias to sell dollars I talked about yesterday continued to shine through the day. As I signed off yesterday, the euro started to rally. That rally really took off in the early morning trading. The single unit climbed to near 1.34 before giving ground back in the afternoon.

A newspaper report interrupted this euro euphoria. The story talked about how the European Central Bank (ECB) will probably have to cut rates further, due to the depth of the Eurozone recession.

Nothing like ruining a rally, eh? But, that’s what happened. The euro gave up more ground in the overnight market and has now fallen back below 1.33.

Instead, the low yielders took the cue and rallied overnight, with the yen leading the way. Strange but true: After five days of high yielders rallying, the yen comes back. Strange… Very strange…

At one point yesterday, with the euro rallying to near 1.34 and the Aussie trading at 73-cents, I said to my colleague Jennifer, “I bet stocks are soaring.” (I said that because recently stocks and currencies have been tied together with the risk bow – when stocks rally, most foreign currencies rally and vice versa.)

But a quick check of stocks showed that stocks were actually off. In fact, selling was the order of the day. You know what this means? It means maybe, just maybe, stocks and currencies are breaking the risk link finally.

Boy, wouldn’t that be sweet? We would finally get back to fundamentals!

But, as I told EverBank’s Big Boss, Frank Trotter, “One day of trading doesn’t make a trend.” We’ll have to keep our eyes out for this pattern to see if it really gets back to fundamentals, where stocks and the majority of high-yielding foreign currencies have a low correlation to each other.

The Perfect Moment to Dump the Singapore Buck

A couple of weeks ago, when I was in Florida, the Monetary Authority of Singapore (MAS) indicated they might push the Singapore dollar lower.

Well, last night, the MAS announced a downward re-centering of the Singapore dollar trading band. Meanwhile, they’re also maintaining the width of the trading band and the policy of zero appreciation. There it is.

Forget all the trade widening and so on, and center on the “policy of zero appreciation.” That does not bode well for the Sing dollar…

The thing I can’t get out of head, is the fact that Singapore must keep its currency in line (vs. the dollar and euro) with the other currencies in Asia to keep its exports competitive. I guess, the MAS is thinking there aren’t going to be any exports. And the ones that are there, they (Singapore) will have a “cheaper currency” and an advantage.

At least the MAS didn’t devalue the currency, as these types of small countries tend to do to tilt the playing field in their direction. And believe it or not: The Singapore dollar actually rallied on the news because the MAS didn’t devalue the currency.

In other words, the Singapore dollar is about to plummet, but it just rallied in the short-term giving you plenty of time to sell. This is like manna from heaven for anyone trying to trade Singapore dollars for something else.

Of course, what should you buy instead? That’s the real question.

For my money: I’m focusing on the countries that still boast a surplus and haven’t gone anywhere near quantitative easing. (By the way, I’ll be speaking more about that in my May issue of Currency Capitalist.)

Goldman Sachs Gives Us a Refund

So did you see that Goldman Sachs is going to raise US$5 billion to repay the U.S.? Rumor has it that Goldman Sachs, wants to repay the government to shed the governments’ pay limits.

Are They Finally Paying Us Back?

I think we’ll see more and more of this going forward. After all, these financial institutions took the funds as a way to raise cheap capital when there were no strings attached. Once the strings were attached, the capital didn’t look so good any more. That’s why I believe we’ll begin to see quite a few institutions give =the money back to the government to.

We, as taxpayers are happy to see these guys giving the money back!

Speaking of taxpayers… Tomorrow is the dreadful day! You have one day to get your taxes all done, if not already done. Mine have been done for a while, and just sitting there, as if they might go away if I don’t sign them and mail them away! HA!

That’s it for today… Yesterday was a blur for me. I worked here until about 3:00, went home took some cough medicine, sat in my recliner and fell asleep immediately. Woke up in time to see the last 15 minutes of 24, and went back to sleep. Nice win by the Cardinals last night in the desert.

Well, today is the day… I go for my quarterly scans this afternoon. I think that after this quarterly scan, I’ll have one more on a quarterly basis, before I go to six-month intervals… That is as long as they remain clean. Which I don’t have any reason to believe they won’t be clean. Of course I never knew in the first place I had cancer until they scanned me for something else. Talk about the luck of the Irish!

Okay, time to go. Have a Terrific Tuesday!
Chuck Butler

P.S. Later this month, several of my Forex-trading colleagues will join me in Bermuda for The Sovereign Society’s Total Wealth Symposium, and our first ever currency-focused boot camp! Naturally, I’m making the trip to tell you lovely folks the easiest strategies to diversify out of the buck for the long-term. But my colleagues are also bringing the world’s best exotic plays, currency option trades, FX ETFs and more. Plus, 15 other financial experts from around the world will be onsite to tell you everything you need to know to make 2009 a rebuilding year for your portfolio. Click here for more details.

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