Kuroda Whips Up A Rout Of The Dollar!

* Yen gains two figures in one night!.
* MSCI says no, for now, to Chinese equities.
* Treasury yields soar higher!.
* Oil sends Petrol Currencies higher .

And Now. Today’s A Pfennig For Your Thoughts.

Good day. And a Wonderful Wednesday to you! Peter Gabriel greets me this morning with his song: In Your Eyes. I recently saw Peter Gabriel doing a concert on TV, talk about someone that has changed their looks as they got older! WOW! Not like me, who still looks the same, minus the hair, and plus too many pounds to count. But the same. HAHAHAHAHA! I tell my beautiful bride that all the time, that someone looks different, not like me, who looks the same. Well, there have been some major developments in the overnight markets, so I guess we have to get to those right away, that is unless I want to hear about it from those that only want the news!

So. Front and Center this morning, there’s been a HUGE rout of the U.S. dollar overnight, mostly in the Asian markets. Now some of that rout has been reversed in the European morning session, but the currencies led by. drum roll please, because you aren’t going to believe this one, the Japanese yen, are still on top of the dollar. Bank of Japan (BOJ) Gov. Kuroda, made comments last night, that the downward movement of yen was overdone, too far, too fast and all of that, and that the BOJ would be watching these moves. Suddenly yen traders acted as if they had received religion from Kuroda’s words, and began selling dollars and buying yen. Just last week, yen traded weaker than 125, and today yen has a 122 handle. So, with yen blowing our 2 full figures last night, the rest of the currencies in Asia, took notice and grabbed onto yen’s coattails.

In other news from Asia. the MSCI, did NOT approve Chinese equities to be included in their index, saying that there were a few important issues related to market accessibility that must be resolved first, and after those issues are resolved, the shares can be added, even outside the regular schedule of its annual market classification review. Now that tells me that China is so close to having their equities as a part of the MSCI index that they can taste it!

Yesterday, I told you how the markets were betting that the MSCI was going to announce that Chinese equities would be included in the MSCI fund. Well, my guitar playing friend, and very intelligent person, Steve Sjuggerud, wrote about this in his Daily Wealth letter yesterday. Steve said that $400 Billion will move into Chinese stocks, based on the decision by the MSCI.. Steve says that “$9.5 Trillion of investor money is benchmarked to MSCI indexes. Large investors like to track indexes. So if a stock is added to a stock market index, big dollars flow into that stock. And if a stock is booted out of an index, the stock is sold heavily. This time, we’re not just talking about moving a stock into or out of an index. We’re talking about moving an entire country into an index. This is a Major Event!”

Chuck again. Yes, it’s an important step for China. And it’s not really whether or not the equities make it into the MSCI at this time, but more about the fact that they will eventually. And the thing to think about here is these Chinese equities will have to be bought in the local exchange using renminbi. are you following the dots here folks?

And then we have the big move in the price of Oil overnight from a $58 handle yesterday to a $61 handles this morning. This move in the price of Oil has been so strong that the petrol currencies all received a ton of love from the traders. Currencies like: krone, ruble, loonie, real, and even the peso, are all booking nice gains VS the dollar this morning.

Speaking of Petrol Currencies. Did you know that there was a new currency that should now be considered a Petrol Currency, and not because they produce petrol, but because their currency is being used to price petrol. I know, you’ve moved the edge of your seat to know that answer to this, and so I won’t tease you any longer. According to a story on www.zerohedge.com  that’s titled: The Petrol Yuan Is Born: Gazprom now settling all crude sales to China in yuan (renminbi, I’ve long explained that the use of yuan by the media, instead of the true currency name, renminbi, is because yuan is easier to say and spell for the media. HA!) This is a very good explanation of the mercantilism of a Petro Currency folks, and I invite you to the link to read it in its entirety.. http://www.zerohedge.com/news/2015-06-09/petroyuan-born-gazprom-now-settling-all-crude-sales-china-renminbi I guess I’ve conditioned you dear readers to check out the stuff on zerohedge.com because I received quite a few emails from readers with this link.

And then the other thing that’s really moving this morning is the 10-year Treasury yield. Yesterday morning the 10-year’s yield was 2.36%, today it is 2.48%… I know that most of you, who don’t really deal in bonds, are thinking that 2.36% to 2.48% is not that much of a move. But let me give it to you in dollar price. Now remember with bonds, yield and price are the inverse of each other, so when the yield rises, the price of the bond goes down. So, for instance, the price of a 10-year Treasury at 2.36% is $97.93. And the price with the 10-year at 2.48% is $96.89 . And then you must also remember that the price is per 1,000 bonds. most people don’t own just 1,000 bonds, Institutions buy by the millions, so calculate that loss out. it’s not pretty.

Well, I guess the PPT has already been called in to work, or else investors are taking profits, because the euro, which was 1.1325 when I came in has just dropped back below 1.13. But that doesn’t erase the move in the overnight markets, and how quickly dollars were sold, folks. It was simply a rout of the dollar. And shows us just quickly the Asian Central Banks will dump the dollar when they can. My fave Gold Researcher, Koos Jansen, who writes for www.bullionstar.com and is a GATA contributor, and I always see his posts on Google+, has a new article on bullionstar.com and it talks about how the Asian Central Banks are redeploying their currency reserves that probably total more than $5.5 Trillion. (obviously, most of that total resides in China, but still the sheer size of these reserves are impressive) And then he points to the new Silk Road program that will have the “The New Silk Road Investment Fund” and the “Silk Road Gold Fund” and they will enable banks to diversify and redeploy their excess currency reserves. It’s a BIG DEAL FOLKS! Do Not Ignore This For Too Long!

I don’t know how else to say these things folks. China is becoming a very BIG DEAL in the world. I really liked what my longtime friend, and newsletter writer extraordinaire, James Powell, of the Global Changes & Opportunities Report, had to say about China in his June/ July issue. In fact, let’s listen in to Jim. “Important Currency developments are also coming from China. Beijing is making additional progress towards making the renminbi an alternative reserves currency to the U.S. dollar. There are still many obstacles that China must overcome before it will happen, but I have little doubt that the goal will be reached.

When the renminbi becomes a reserve currency, many nations that resent the long dominance of the U.S. dollar will quickly jump ship. Many have already done so through currency exchange agreements with China. It’s another investment trend that we can use to our advantage.”

Jim then goes on to say that one of the best places to set up your renminbi account is EverBank. So. I want to thank him for not only giving me some pfodder for the Pfennig Readers this morning, but also for the great plug!

The Reserve Bank of New Zealand (RBNZ) will meet tonight, just after the U.S. closes to discuss rates. The markets are split 50/50 on whether the RBNZ will cut their benchmark rate or not. I think not, and I am on record long before today, in saying that. But that doesn’t mean anything to the RBNZ, and their Gov. Bollard, who never misses an opportunity to diss kiwi. But with a housing bubble in Auckland, Bollard had better be walking on eggshells for a rate cut would be a double whammy on things.

In the U.K. Bank of England Gov. Carney, is going to make is annual Mansion House Speech today. Let’s go back to last year’s speech, to find that Carney was very upbeat about the U.K. economy, and uttered the famous words that, “interest rates could increase sooner than markets currently expect”, and that led to a HUGE and long run up in the value of the pound, for traders were convinced that Carney was right. But Carney didn’t fool me! And I said so! Now, fast forward to this year, and what have we seen? The U.K. economy has been quite soft, and now the thought of a rate hike is a small thought in the rear view mirror. So, what will Carney say today? Well, if I know him and his bag of promises like I think I do, I wouldn’t be surprised if he did a sequel of his speech last year! You have to wonder what traders will do should he be upbeat again.

Silly me, I really thought the other day, that U.S. Retail Sales printed on Wednesday, you know, today. But, a second take on the economic calendar, tells me that Retail Sales won’t print until tomorrow. Leon Russell was just singing his song: Masquerade. I love his version of that song.

The U.S. Data Cupboard is still in search of data, and only has the May Monthly Budget Statement today. which should be close to $100 Billion deficit. following April’s $130 Billion Deficit. Hmmm, I thought that the U.S. Budget Deficit for this fiscal year was going to show a big improvement? Well, maybe there are still accounting “adjustments” that need to be made, eh? Oh, and don’t forget, that IF the U.S. accounting procedures were held to the same rules as U.S. Corporations, the deficit each year would be quite a bit more. I used to track this stuff, but then no one really paid attention to it, and at shows I would see the glossy eyes in the audience, but the difference was HUGE. One of these days, I’ll dig those presentations out and drag those numbers to the Pfennig just to show you…

Well, Gold is also taking part in the rout on the dollar this morning, with the shiny metal up $10 as I write. So, we have yen surging, and the rest of the currencies grabbing onto yen’s coattails. We have Oil rising in price, along with Gold, and U.S. Treasuries falling in price. It’s quite a scene on the screens this morning folks. Did you hear that there’s now an investigation into Treasury rigging, sort of like they did with LIBOR, and FX in the last couple of years? No wonder Gold is driving higher in price this morning.

And here I will refer to my friend, James Powell once again, who said in his June/ July letter, that “There’s no reason to expect the outlook for precious metals to improve until inflation picks up or we have a major black swan even that scares investors.” Could this Treasury investigation be a black swan event? It sure looks like that could be the direction this takes, folks. We had better keep an eye on that!

To recap. Well, Bank of Japan Gov. Kuroda got things whipped up last night, when he came out with the same old stale words about how the BOJ will be watching excessive moves in yen, but this time, he lit a fire under traders, and they began to sell dollars and buy yen, and the rout on the dollar was on! The MSCI did not include Chinese equities in their index, now, that is, but it’s going to happen, and when it does, Steve Sjuggerud says it will be equal to $400 Billion in Chinese stocks, of which all will be in the local market, denominated in renminbi. The price of Oil soared overnight, sending the Petrol Currencies higher VS the dollar, and could the Chinese renminbi be a new Petrol Currency? Treasury yields are soaring higher again, is it time for the Fed to step in again? And Gold is pushing higher this morning on news that there could be an investigation into Treasury rigging. a black swan event? I guess we’ll have to see, eh?

For What It’s Worth. Longtime markets analyst, Dave Kranzler, of IRD (Investment Research Dynamics, www.investmentresearchdynamics.com ) believes that there has been a major derivatives event unfold in the past couple of weeks behind what he calls the , Orwellian Curtain” used by the elitists to hide the inner workings of the financial markets, especially with regard to big bank balance sheets and OTC derivatives. He goes on to quote a very well connected Wall Street / DC insider as he discussed how illiquid the bond markets have become. “I’ve never seen so many sophisticated Wall Street’ers this scared in my entire career.”

Chuck again. It’s quite a long article, with lots of technical stuff on bonds, derivatives, and so on, if you’re good with that, I strongly suggest you go the website above and read it. It was an eye opener for me. for sure! But plays well with my call late last year, that at some point in 2015, the bond market will become illiquid, and when it does, the Fed will have to step back in to the bond market. So, there you have it. I could go on and on about when the Fed has to come back to the bond buying market, that two things will lose credibility with the markets. the dollar, and the Central Bank. Of course, I don’t KNOW that these things will happen, like that, I just look at the markets and see what’s going on, and make rational, educated calls. But I don’t know or have any inside information regarding this, so take it with how ever many grains of salt that you wish..

Currencies today 6/10/15. American Style: A$ .7745, kiwi .7195, C$ .8165, euro 1.1290, sterling 1.5495, Swiss $1.0760, . European Style: rand 12.3540, krone 7.7105, SEK 8.2945, forint 276.50, zloty 3.6750, koruna 24.2030, RUB 54.41, yen 122.95, sing 1.3440, HKD 7.7525, INR 63.83, China 6.1173, pesos 15.43, BRL 3.0970, Dollar Index 94.88, Oil $61.34, 10-year 2.48%, Silver $16.17, Platinum $1,116.43, Palladium $746.51, and Gold. $1,187.48

That’s it for today. Another loss by my beloved Cardinals last night. After losing their “power hitting RBI producing left fielder the night before. I think the loss of the player hurt carried over to the team last night. Hopefully they can forget about it for today’s “get away day” day game. That was something of a “great escape” at the correctional facility in NY eh? Well, it was back to Chuck and Alex fending for themselves for dinner last night, but we got through it, without too big a mess! The Cure is playing their song: Close To Me, on the iPod right now. I wish, no, never mind. Well, last week, I told you about how YAHOO was going to stream an NFL game next season between the Buffalo Bills and the Jacksonville Jaguars, and then said something that wasn’t nice about the two teams, and for that I apologize to the fans of these teams. I need to remember that sports is a lot like investments, in that past performance is no indication of future performance. And they could very well be on their ways to Fantastico years! The Rams went from worst to Super Bowl Champions in one year, so there’s proof! And with that, I have to get out of your hair for today. I hope you have a Wonderful Wednesday!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts