Guess What's Wrong With This Dow's Rally
Nicholas Santiago | Mar 14, 2013 04:02PM ET
Every talking head on the financial news networks are celebrating the new all-time closing highs on the Dow Jones Industrial Average (IBM ) sell more goods abroad (exports) if the U.S. dollar Index continues to strengthen? I seriously doubt it.
Every country in the world is now devaluing there currency in effort to boost their exports. Has anyone looked at a chart of the Japanese Yen recently? The Japanese Yen has been plunging lower against every major currency in the world these days and that has helped the Nikkei 225 Index to rise to new 52 week highs. This money printing is not going on by just the Japanese, it is occurring in the United States, European Union, England, India, China, Zimbabwe, and almost every other fiat currency nation in the world. In other words, the race is on by almost every country to devalue their currency faster than the next country to boost exports.
The Dollar Index
The U.S. Dollar Index futures (DX-M3) have been rising on the back of better economic data in the United States. There is also more money printing taking place in the other countries, which is forcing traders and investors to buy U.S. Dollars. The next factor for why the U.S. Dollar Index is rising is because the U.S. Dollar is the world's reserve currency. For example, if you are trying to buy a barrel of oil in Japan you must convert Japanese Yen into U.S. Dollars in order to buy that barrel. Most commodities trade in U.S. Dollars so there is always going to be some demand for dollars by other countries. Either way, the strong U.S. Dollar is going to hurt the multi-national corporations in the DJIA. During the next earnings season this will be evident. This is the biggest problem with this current rally in the DJIA.
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