Dollar update (May 2008 edition)...

It is the first week of the month and time for another review of the US dollar. At the last report on April 4th (see here), the dollar was at 15.95 Czech crowns. This was an improvement off the lows of about 15.5. As I write this, the dollar has continued to strengthen and sits at about 16.36. Here is the graph.



Of course, the big question is whether the dollar has found the bottom yet or not. Back in January I predicted that the dollar had already seen the bottom (it was at about 18.15 then). Read it here. The logic for my prediction that the dollar would rise was based on the belief that Europe would eventually succumb to the same sub-prime woes as the US and fall towards recession. The US, having entered first would also exit first, resulting in a stronger dollar.

I still believe that a stronger dollar is at hand, although the timing of my initial prediction in January may have been a little premature. The Federal Reserve cut rates again yesterday by .25, but this is widely expected to be the last of the cuts (there was even some speculation that this cut might not happen at all and the Fed would elect to keep rates firm). No more cuts will help keep the dollar from declining further against the Euro and Crown. Also, there are signs that Wall Street believes that the sub-prime mess may be mostly over. The Dow is up and optimism reigns (at least for the moment). The recent growth figures from the government show decreased growth (down to .6%) but not the negative growth of a recession.

The price of oil has also been skyrocketing lately, but I believe that oil, too, has peaked and will drop dramtically in the near future. This will also help make a stronger dollar. I will post on that soon.