Tuesday, December 16, 2008

Madoff effect on currency markets



The yen hit a 13-year high against the dollar following news of the Madoff scandal and the euro is now at a two month high versus the greenback. Some of the foreign institutions that have been affected include: HSBC, Nomura, BNP Paribas, Reichmuth & Co, Union Bancaire Privee and Europe's second largest bank by market value, Banco Santander.

Foreign investors (and many Americans) view this as a massive regulatory failure by the SEC and other U.S. regulatory agencies. This is probably exacerbating the selling in the dollar. It could go on for several more days as fund selling and other liquidations are conducted.

2 comments:

Matt Franko said...

Mike,

Right on your cue:

Jim Rogers Plans to Sell Dollar in `Artificial' Rally December 16 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks with Bloomberg's Carol Massar about the outlook for the U.S. dollar.....

Mike Norman said...

I'd say he's a little late. That "artificial rally" has been evaporating quite rapdily. Was he buying EUR/USD at 1.27? No! He'll buy it at 1.3850 instead!!!

By the way, Rogers said back in September that he was shorting the dollar and Treasuries, big time.

If he followed through on his own advice, he'd better sell a lot of books or get paid huge amounts of honorarium to make up for his trading losses.