Reply #3: daily dollar watch

[UpInArms]

http://quotes.ino.com/chart/?s=NYBOT_DX

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Dollar Rallies on Thin Trading

http://www.dailyfx.com/story/dailyfx_reports/daily_fundamentals/5644_dollar_rallies_on_thin.html

US Dollar

There has been a rather impressive rally in the dollar today against all of the majors. A plethora of rationales have spurted up with none being any more convincing than the next. Some of the reasons that we have been hearing include yield spreads being positive in favor of the dollar, the stock market rallying, early holiday position squaring and the transit strike in NY taking away some of the market's resistance. The most logical reason for the move was best said by Jamie Coleman of IFR, who indicated that "year end illiquidity combine with staff-shortages in New York today make for untypical dealing conditions." If that is case, then it may seem that US traders have far less conviction in their own currency than their European and Asian counterparts. As expected, the market completely shrugged off the weaker PPI report. Producer prices fell 0.7 percent in the month of November with core prices up only 0.1 percent. Both gasoline and car prices went down 10.7 percent and 0.8 percent respectively. After the big drop in consumer prices reported last week, the market had already discounted falling headline inflation and the possibility of a contraction in PPI. Meanwhile, housing starts rose by the most in seven months. This certainly undermines our warning of a housing market downturn, but then again, just because builders continue to break ground on new homes, doesn't mean consumers are buying them. New home sales are expected later this week. After hitting a high in October, home sales are expected to have retraced last month. Tomorrow, we are expecting the final release of Q3 GDP and personal consumption. Neither of which is expected to be market moving since they are suppose to only confirm previous figures, but if the transit strike continues, the illiquidity in the markets could certainly deliver another bout of volatility.

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