Phase 2 Of The Dollar’s Moon Shot.

* Draghi tells Greece to allow TROIKA in..
* Faber says China to back renminbi with Gold!.
* Yen set for next leg down?..
* S$ gets caught up in yen weakness .

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

Good day.. And a Tom Terrific Tuesday to you! Uriah Heep and their song July Morning greets me this morning. It starts out soft and ends heavy duty, sort of like most of my mornings! Yesterday, never did get around to ending heavy duty, ending with a whimper, instead. But today is a new day, new beginnings and all that, so I’ve got that going for me, eh?

The dollar is not having anything to do with soft beginnings. The dollar went on a moon shot ride after the Jobs report on Friday and hasn’t looked back! Even the currencies like rubles, and real that currently pay high interest rates are getting whacked. But think about this for a minute. I’ve said this before, but it bears repeating. IF and when the Fed does hike rates 25 Basis Points to bring their Fed Funds rate to .75%, the ruble will still have more than 16% in a positive differential, and the real will have more than $12% in a positive differential. How can 25 Basis Points be that big of a deal to these two? Sure the 25 Basis Points rate hike does open Pandora’s Box of additional rate hikes, but for now this is where we are, and to me, that’s still a BIG IF the Fed hikes rates in June.

You know, the markets may be backing the Fed into a corner though. Yes, the markets could have positioned verything so dependent on a rate hike that the Fed will have no choice but to hike rates in June. I don’t think we’re there yet, but as long as the stock market doesn’t fall completely out of bed, and the 10-year Treasury doesn’t rise to 3%, things should hold for the Fed to back out of a rate hike in June, which I still believe they will do, at this point.

Gold has also been whacked during this mission to the moon by the dollar, so there’s nothing out there folks, that even looks like it could buck this moon shot by the dollar. What’s an investor to do? Well, you could go to cash, but until rates really begin to run higher, banks are going to be slow to raise the deposit rates. Or at least that’s been their MO since the beginning of banking! But bonds are losing value, stocks are losing value, currencies are losing value and precious metals are losing value. YIKES! When you put that way, Chuck, deposit rates don’t sound all that bad. While you’re looking for deposit rates that appeal to you, don’t forget that EverBank has a yield pledge to remain in the Top 5% of Competitive Accounts. That way you don’t have to go “yield hopping”. for details see:

OK. The Big News on the news wires this morning is that the Greeks have agreed to allow the TROIKA back into Greece to begin talks. Remember the TROIKA is the IMF, the European Central Bank (ECB), and the European Commission. Seems there was some confusion on the Greeks’ willingness to allow the TROIKA back into Greece, but when cornered the Greek PM said it was all a misunderstanding. Sure it was. I’m sure there was some political saber rattling going on there ahead of the meeting, which was going to take place all the time.

Besides the selling in the euro from dollar buying, this Greek thing just continues to weigh on the euro. The Eurozone needs to go on a diet, and drop 50 pounds, so they can be like Marie Osmond and say, “I’m Marie and I lost 50 pounds!” Of course I’m saying that the 50 pounds in the Eurozone’s case would be Greece. Unfortunately for the Eurozone, that’s not going to happen, and so they need to just convince themselves that they need to go to the Big & Tall store. HA!

Well, my currency of the month article that was in the Sunday Pfennig this past Sunday, didn’t get as many responses as the article on the pound the previous month. Although it did produce a quote that appeared on Google+ yesterday! You know, the Indian rupee, the Currency of the Month, has the improving fundamentals and good interest rate differential to dollars, euros, sterling and yen. But it has to prove it can maintain these fundamentals and that they aren’t just some flash in the pan stuff that India is known for. I highlight the Reserve Bank of India (RBI), Rajan, and the PM Modi in the article and point out that even though they have done some wonderful things so far, the best thing to happen to India in a long time is the drop in the price of Oil.

A dear reader did ask that the next Currency of the Month be the Singapore dollar (S$). Well, I can do that right here! The Monetary Authority of Singapore (MAS) is Singapore’s Central Bank, and they decide the direction of the S$ by either widening or narrowing the trading band that the S$ can trade within. The MAS if famous for using the S$ to combat or promote inflation, and not interest rates like the rest of the world. Well, the MAS will meet in about a month, and while the markets may be looking at the MAS to widen the trading band, which would, at this point in the proceedings bring about more S$ weakness, but I’m going to go out on a limb here, no worries, I picked out a big strong limb to hold me, and say that the MAS will leave the trading band unchanged, but at their previous meeting to the one next month, the MAS indicated they were OK with S$ weakness, and in that time the S$ has dropped in value VS the dollar.

Singapore is foremost an Asian export country, and the disease that the Japanese yen began spreading across Asia in the last two years, really took hold of the S$ in the past 6 months. Recall, I said back then that I feared what Japan had decided to do, which was really weaken the yen further, would eventually spill over to the rest of Asia, due to the fact that these Asian countries can’t let one country’s currency get out of whack while others remain strong, because of the competition for exports.

Speaking of Japan. the yen just continues down the path of weak currencies that it began almost 2 years ago now.. The yen is within spitting distance of 122. We haven’t seen 122 in yen since 2007. And before that 2002.. PM Abe, is still preaching about ending deflation and reviving the economy, so far his 3 arrows have missed the mark, and the economy is still in Neverland. Nevereconomy, nevercurrency strength, neverinflation. that’s where Japan is. And now that the markets believe there are no geopolitical problems out there ( I guess they are turning a blind eye toward ISIS, or the Chinese island grabbing in the S. Pacific, the Middle East tinderbox and more) they have taken that safe haven status from the yen. I look for yen to trade between 125 and 130 by the end of this year, and PM Abe will finally see what his economic reforms will do with a very weak yen.

Aussie and N.Z. dollars (A$ and kiwi) are getting whacked, for the narrowing interest rate differential too. At least their respective differentials are smaller compared to rubles, real and rand.. There was a BIG scare in N.Z regarding their infant formula sector. There were rumors flying around that a poison was slipped into the formula.. And this has added to the kiwi weakness this morning. Dairy, wool and lumber, in New Zealand, folks. that’s the exports in a nutshell, so any problem with production of one of three is a BIG problem for New Zealand and kiwi.

Once again, I ask the question, how long will it be before the sanctions on Russia are lifted? The sooner the better in my opinion, as the Russian and Eurozone economy is suffering due to the sanctions. Come on everyone let’s get going on this!

As if the Brazilian real needed anything else to add to its misery, it does now. Brazilian Supreme Court ruled this past weekend that congressional members can be investigated, as there were challenges to one Senator for his involvement into Petroleo Brazil, BUT said that President Rousseff could not be investigated. And that’s who the investigators wanted! So, political wrangling is causing the real some down to earth problems right now. The real has traded to a 2004 low this morning. YIKES!

Tonight in China, both Zhous, Zhou Qiang, head of the Supreme People’s Court, and Zhou Xiaochuan, Gov. of the Peoples Bank of China (PBOC) will speak that the Chinese NPC. I expect to read quite a few good quotes from these two. That is if they get printed! China is still a Communist country, and although they’ve probably become more capitalistic that most capitalistic countries, deep down they are still Communist. which means they don’t have to print everything these guys say if they don’t want to, and nobody can make them!

The renminbi / yuan ‘s trading has been reflective of the slowing down of the Chinese domestic economy. We saw yesterday that Chinese exports are attempting to pick up the slack from the domestic economy, but so far that’s not happened.

Did you see that the well-respected analyst/ investor, Marc Faber said that he believes that China is going to switch to a Gold backed currency, and that they will be able to do this because they have accumulated so much Gold, and that the markets don’t understand how much Gold the Chinese have accumulated. That’s pretty cool, because that’s the same stuff I’ve been telling you for 4 years! Shoot Rudy, maybe even 5 years. but I’ll stick with 4 for sure!

The U.S. Data Cupboard only has the Wholesale Inventories for January to print today. Tomorrow will be another day of nothing for the cupboard, but then on Thursday, we finally get back to real data, as Feb Retail Sales will print. You may recall that January’s Retail Sales fell -.8%, so it will be interesting to see if February can play catch up here. The BHI was very active in January, and that would indicate a recovery of sorts for Retail Sales.. Thursday I’ll be in St. Pete, but I’m sure I’ll remind you of this, and what the BHI indicates.

Oh, and a dear reader sent me this email regarding my rant on the Jobs data yesterday: “of course the job creation # is true. There were thousands of kids out shoveling snow for $2. the Gov’t would never lie.” HAHAHAHAHA!

For What It’s Worth. It was fun seeing the guys at the DR. (Daily Reckoning picked up some of the stuff I said about the jobs data in yesterday’s Pfennig, for the DR yesterday afternoon. I always get a kick out of seeing my name up in the lights!

OK for today’s FWIW, I have a little ditty about the BRICS Development Bank and you can read the entire article here:

“Russian President Vladimir Putin has signed a law ratifying the deal establishing the BRICS New Development Bank (NDB), according to a document published on Monday on Russia’s official website for legal information.

The BRICS New Development Bank (NDB) was set up to challenge two major Western-led giants – the World Bank and the International Monetary Fund. NDB’s key role will be to serve as a pool of currency for infrastructure projects within a group of five countries with major emerging national economies – Russia, Brazil, India, China and South Africa.

According to the Russian Finance Ministry, the New Development Bank is expected to start functioning fully by the end of the year, with the headquarters slated for opening in Shanghai. The chairmanship, with a term of five years, will rotate among the members.”

Chuck again.. yes, this and more for the BRICS Development Bank (BDB) as the Emerging Markets countries will now have an alternative source of funds in which to borrow going forward, and without the strings attached that the IMF and World Bank uses. this is one of the key reasons I put together the BRICS MarketSafe CD last year.

To recap. the dollar is still on its moon shot and hasn’t looked back since the jobs report on Friday morning. Even the “real positive interest rate differential currencies” of Russia and Brazil are getting sold, even though as Chuck points out, their positive rate differential will still be quite significant IF the Fed does hike rates in June. Gold gets whacked again, but Marc Faber says China is going to back the renminbi with Gold, something Chuck has told you for 4 years now.The Brazilian real is trading at a 2004 low, the euro is trading at a 2003 low, and so on, as currencies are all down since Friday.

Currencies today 3/10/15. American Style: A$ .7635, kiwi .7280, C$ .7905, euro 1.0760, sterling 1.5070, Swiss $1.0070, . European Style: rand 12.2280, krone 8.0325, SEK 8.5370, forint 285.55, zloty 3.8390, koruna 25.3340, RUB 61.01, yen 121.65, sing 1.3880, HKD 7.7595, INR 62.65, China 6.1572, pesos 15.56, BRL 3.1215, Dollar Index 98.29, Oil $49.78, 10-year 2.19% Silver $15.77, Platinum $1,133.88, Palladium $806.75, and Gold.. $1,162.42

That’s it for today. Well, I’ll be writing tomorrow from home base, then hitting the road for a 4 hour drive to the west side of the state. I really need to get to work on my presentation for the Conference. The first time the Butlers went to spring training, the Cardinals trained in St. Pete, at Al Lang field. It was even more cozy than their current home in Jupiter, Roger Dean Stadium. It has been standing room-packed the last two games, and all seats are sold the rest of March. My spring get-away has turned into ever Cardinals fan’s spring get-away! The rash that affected my hands two weeks ago, is back, and worse this time! UGH! We can’t figure out what’s causing this to happen. No biggie, just a stupid allergic reaction to something. The Red Sox brought their 2nd team players to town yesterday and still beat the Cardinals, as the Cardinals proved once again that they are too “left handed”. Throw a senior citizen left handed pitcher out on the mound and he’ll beat the Cardinals! With one exception, you’ll have to ask Clayton Kershaw about that from the past two post seasons. The Blue Jays are playing their song: Maybe, on the iPod right now. This is from the Blue Jays only album, and features two Moody Blues members, Justin Hayward and John Lodge. OK.. time to go. I hope you have a Tom Terrific Tuesday!

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